MUMBAI: The board of the Reserve Bank of India said on Friday it had deliberated on the governance framework of the central bank and decided the matter requires "further examination".
The governance issue was a key part of the board meeting's agenda as the government wanted to have a greater say in the crucial regulatory decisions of the central bank through its board nominees.
The meeting, which wrapped up in less than four hours on Friday compared with the previous two meetings that lasted nine hours, indicated a likely smoother ride ahead for the central bank and the government under new RBI Governor Shaktikanta Das.
"The board deliberated on the governance framework of the Reserve Bank and it was decided that the matter required further examination," the RBI said in a statement.
The governance agenda included re-constituting or reviewing the sub-committees of the board which make regulatory decisions, in a bid to curb the RBI's unilateral decision-making powers. Currently, the RBI decides the regulatory and operational issues of banks and the board is informed later.
Das' bureaucratic links are expected to mend a rift between the government and the central bank that had widened sharply under his predecessor Urjit Patel, but the pressure to have greater control over the RBI's regulatory power through the board is likely to continue.
OTHER ISSUES
The board also reviewed global and domestic challenges, liquidity and credit delivery and currency management, the RBI said in the release without giving further details.
There were some expectations that the RBI might come up with measures to ease liquidity further following the government's demands.
Prime Minister Narendra Modi's government is keen to boost the economy ahead of general elections that must be held by May. Modi's ruling Hindu nationalist Bharatiya Janata Party's need for support from the RBI has become more imperative after the government lost all five crucial states and relinquished power in three of them this week.
Defending the government's demands, Finance Minister Arun Jaitley told ET Now on Thursday there was a need to boost credit and liquidity, and bringing up these issues with the central bank did not mean it was infringing upon the RBI's autonomy.
"RBI and government's difference has to be respected," Jaitley told ET Now on Thursday.
The government has been persistent with its demands for more liquidity, relaxation of lending curbs to help indebted state banks and a greater share of the RBI's excess capital reserves.
The continuous pressure deepened the rift between the RBI and government, which eventually led to Patel's shocking resignation earlier this week.
However, Das, who has been a bureaucrat for nearly four decades, is deft at building consensus and has promised to be more consultative, in contrast to Patel's taciturn nature and his unwillingness to engage often with stakeholders.
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