RBI meeting highlights: Panel to look at ECF; RBI to consider easing PCA

RBI board decides to constitute expert committee to examine ECF; membership and terms of reference of the committee will be jointly determined by govt and RBI

8:59 PM

The board, while deciding to retain the CRAR at 9%, agreed to extend the transition period for implementing the last tranche of 0.625% under the Capital Conservation Buffer (CCB), by one year, i.e., up to March 31, 2020. 

8:59 PM

On PCA 

 

With regard to banks under PCA, it was decided that the matter will be examined by the Board for Financial Supervision (BFS) of RBI.

8:58 PM

On MSMEs 

 

The board also advised that the RBI should consider a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to 250 million, subject to such conditions as are necessary for ensuring financial stability.

8:56 PM

On RBI capital framework

 

The board decided to constitute an expert committee to examine the Economic Capital Framework (ECF)

 

The membership and terms of reference of which will be jointly determined by the Government of India and the RBI  

8:53 PM

RBI issues its official release on what transpired during the board meeting. 

8:37 PM

The Finance Ministry and the RBI, together, will decide on the composition of the committee to look into the RBI capital reserves framework, reports CNBC-TV18's Shereen Bhan.

8:34 PM

Existing committee of the RBI to look at the PCA framework to see if certain banks under the PCA should be given some relaxation, reports CNBC-TV18's Shereen Bhan, citing unnamed sources. 

8:31 PM

The RBI will allow loan restructuring for MSMEs, reports CNBC-TV18, citing what unnamed sources told news agency Reuters.

 

8:27 PM

The RBI board meeting ended on a 'cordial note', reports CNBC-TV18, citing what unnamed sources told news agency Reuters. 

8:26 PM

RBI will form a panel to review its surplus funds and transfer to the government, reports CNBC-TV18, citing what unnamed sources told news agency Reuters.

8:24 PM

RBI will take measures on improving liquidity and ease restrictions on select state-run banks' reserve ratio, reports CNBC-TV18, citing what unnamed sources told news agency Reuters.

8:17 PM

What we know at the moment

 

1) There are indications that the RBI may be willing to ease lending norms for MSMEs but liquidity to NBFCs remains a sticking point, reports PTI.  

 

2) It may also be open to injecting liquidity through open market purchases of bonds but is resisting relaxing capital buffers for banks, reports PTI.

 

3) Discussions in the meeting may also have focused on the massive Rs 9.69 trillion reserves of the RBI, with Gurumurthy and the finance ministry wanting it to be lowered in line with global practices, reports PTI.

7:33 PM

The RBI board meeting has just concluded. A statement from the central bank is expected soon.  

7:32 PM

All board members are leaving the RBI headquarters, reports CNBC-TV18.  

7:30 PM

Two RBI board members -- Sudhir Mankad, an independent board member, and Sachin C -- leave from the RBI board meeting, reports CNBC-TV18. 

7:09 PM

Most banks, including those under PCA, meet mandatory priority sector lending for MSMEs

Amid a raging debate on need for easing rules governing credit to MSMEs, an analysis of the RBI's data on such loans show that a large majority of banks, including those facing 'prompt corrective action', have achieved the mandatory priority sector lending targets for micro-enterprises, news agency PTI reported on Friday.  (Read more here)  

7:01 PM

Centre's proposal for closer supervision of RBI not to be taken up today

 

On Friday evening, there were reports that the Centre was proposing changing rules that would enable closer supervision of the central bank. It has also recommended that the RBI board draft regulations to enable setting up of panels to oversee functions including financial stability, monetary policy transmission, and foreign exchange management. However, sources said this was a held over item from the last board meeting agenda. On Saturday, officials confirmed to Business Standard that the issue would not be taken up on Monday. (Read more here)  

6:53 PM

The RBI board's independent directors may take decisions if the standoff between the RBI and the government continues. (Read more here)  

6:49 PM

How a truce was brokered between the government and RBI

 

The government and the RBI appeared to have reached a truce on a number of issues ahead of the Monday meeting, Business Standard had reported on Saturday. This softening of stand by senior figures on both sides of this prolonged dispute was expected to lead to concrete resolution on at least two issues — prompt corrective action (PCA) and a special refinance window for non-banking financial companies (NBFCs). The efforts to secure a "ceasefire" between North Block and Mint Road were led by people in the top-most levels of government. (Read more here)   

6:26 PM

The RBI board is in a huddle at present, with all 18 board members in attendance, amid an open rift between the government and the central bank, reported CNBC-TV18. 

6:07 PM

Govt proposes change in rules for closer oversight of RBI, empowering board

 

On Friday, citing unnamed sources with knowledge of the matter, Bloomberg had reported that the government had proposed changing rules that would enable closer supervision of the RBI. The move was meant to empower the regulator's board, which includes government nominees, and give it a supervisory role, the sources had said. (Read more here)   

5:54 PM

Jaitley's concerns

 

Two days before Monday's meeting of the RBI's central board, Finance Minister Arun Jaitley had said that growth must not be throttled by limiting credit availability and liquidity. (Read more here) 

5:49 PM

Here's why RBI's Urjit Patel should hold firm

 

Under pressure to return surplus capital to a resource-strapped government, Patel should borrow an idea from Buiter's paper to argue that very little of the central bank's assets and liabilities are actually visible. For New Delhi to covet what's in sight of the accountants would be like a ship's captain deciding to go over a small chunk of ocean ice, ignoring the risk of ramming into a submerged iceberg. (Read more here)  

5:45 PM

A short history of RBI's turbulent relationship with the government 

Think the present rift between the RBI and the government is a new thing? T C A Srinivasa-Raghavan brings you the history of the clashes between the central bank and the government. (Click here) 

5:40 PM

Section 7 may be off the table

 

The government has made up its mind it will not use a contentious provision (Section 7) of the RBI Act to issue directions on its suggestions to the central bank, sources told Business Standard on Sunday. (Read more)  

5:36 PM

Of the 21 state-owned banks, 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders. These are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra. 

5:29 PM

PCA framework issue explained

 

The PCA framework kicks in when banks breach any of the three key regulatory trigger points, namely capital to risk weighted assets ratio, net non-performing assets (NPA) and return on assets (RoA). Globally, PCA kicks in only when banks slip on a single parameter of capital adequacy ratio, and the government is in favour of this practice being adopted for the domestic banking sector as well, according to PTI. (Read more)    

5:20 PM

To ease the financial burden, the government has petitioned the RBI to bring the minimum capital requirement norms in line with international practices, followed in the Basel norms. The move may unlock capital of Rs 600-650 billion for PSBs, according to the government’s estimates, sources said. However, the RBI has not yet agreed to the government’s demand. 

5:06 PM

Some officials, as reported earlier by Business Standard, have also sounded out independent directors that the board meeting may continue on Tuesday if all issues are not resolved on Monday. 

4:56 PM

Patel to stay

 

While there have been reports and demands from some quarters for the Governor to step down, sources told news agency PTI that Patel was unlikely to yield under pressure and would rather mount a strong defence of the central bank's policies regarding stringent NPA recognition norms, as well as measures taken to ease credit supply to MSMEs.  (Read more)