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A majority of the 18 members of the board of directors, now grouped with government nominees, intend to lobby for less restrictions on lending and governance, which would give the board more votes, according to three sources with direct knowledge of what was said The board of directors met for the last time on November 19.
Like the government, most board members believe that RBI should be "more transparent and accountable" for its decisions, said a source, who was also aware of subsequent discussions within the government.
Prior to the November meeting, senior officials in the administration of Prime Minister Narendra Modi exerted public and private pressure on political issues, raising fears among former central bankers that the RBI was in danger of losing its position. independence.
The legislative elections are scheduled for the month of May, voters are concerned about the low agricultural income and the need to create enough jobs, Modi is keen to stimulate the economy and seeks a RBI to facilitate lending policies.
"Relations between the RBI and the government now look like tense rubber," said a former senior RBI official. "Once extended, the rubber will not recover its original size.The memory of this major badault on the autonomy of the central bank will last a long time."
The worsening of the atmosphere between the New Delhi government and the Mumbai central bank fueled rumors that the media speculated earlier in the month that the RBI's governor, Urjit Patel, might consider resigning.
Previously, the board of directors acted little more than as an advisory body, but under the 1934 Central Bank Act, it is able to possess real strengths and advantages. 39, impose policy changes.
To accelerate its transformation, the government appointed experts to the council in a variety of areas, including accounting, technology, and finance.
At its next meeting, it is likely to consider how the central bank and the board of directors engage, as well as the functioning of the subcommittees of the board, indicated sources.
"The next council will deal with the agenda of the two previous meetings," said a second source. "This mainly includes governance at the central bank, the relationship between the board of directors and the RBI and other related issues."
Other problems could include increased liquidity support to a weaker non-bank financial sector, the functioning of Central Council subcommittees, and the easing of credit restrictions for eleven public banks subject to a rapid corrective action plan (PCA) imposed by the RBI.
"The governance of the RBI, PCA and liquidity are our top priorities," said the first source, adding that he expected the RBI to accept this viewpoint the most early possible.
Former RBI officials, including a governor and deputy governor, said that the board of directors had never tried to interfere in the bank's regulatory functions Central.
Spokespersons of the Ministry of Finance and the RBI did not comment on this article.
RISK OF "INFECTION WITH THE HOSPITAL"
Key government officials asked the RBI to relax the capital rules of banks, to provide more liquidity to the shadow banking sector , support small business loans and let the government use more RBI's excess reserves to revive the economy.
At its meeting last week, the RBI's board of directors decided that a sub-committee would examine the possibility of easing the restrictions for the eleven banks and make recommendations. to the board of directors.
This decision followed the October Board of Directors meeting, which had highlighted an improvement in the situation of some banks under the CPA, based on parameters such as the recovery of bad debts and faster growth of deposits.
By this time, the RBI had wanted to wait a little longer to see if improvement was continuing before raising the limits, said a third source. But the government thinks the wait would risk generating more risk and expects the RBI to lift the limits of four of the lenders.
"We can not leave a patient in the hospital any longer as he risks getting an infection or spreading infection among other patients," said the second source, stating that the APC list could not be static. a.
Unhappy with these pressures last month, RBI deputy governor Viral Acharya warned that compromising the central bank's independence could be "catastrophic".
This sparked a public feud between the two parties and tensions in the run-up to last month's board meeting, during which the RBI agreed to relax a capital standard. for banks.
The council also instructed the government and the RBI to form a committee to decide on a specific method of transferring excess reserves from the central bank to the government, a thorny issue for both parties.
"The main problem that highlights the divide is that the government believes that the interactions and consultations between the government and the RBI have been inadequate on all these issues," said the third source.
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