Expert panel to look into issues concerning capital surplus: RBI

MUMBAI: The RBI board on Monday decided to set up a high-powered committee to examine issues related to surplus capital of Rs 9.69 lakh crore with the central bank and advised it to consider a scheme for restructuring stressed assets in the MSME sector.

The RBI board meeting lasted nine hours.

Mumbai, November 19

The RBI board on Monday decided to set up a high-powered committee to examine issues related to surplus capital of Rs 9.69 lakh crore with the central bank and advised it to consider a scheme for restructuring stressed assets in the MSME sector.

At a nine-hour long meeting of the board, it was also decided that the Board for Financial Supervision (BFS) of the RBI would examine the issues concerning the banks that are under the Prompt Corrective Action framework, according to a release.

"The Board decided to constitute an expert committee to examine the Economic Capital Framework, the membership and terms of reference of which will be jointly determined by the Government of India and the RBI," the central bank said.

Further, the apex bank has been advised to consider a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to Rs 25 crore, subject to such conditions as are necessary for ensuring financial stability, it added.

A marathon meeting of the RBI board was held amid a rift between the central bank and the government over several issues, including how much capital the apex bank needs, lending norms for small and medium enterprises and rules for weak banks.

RBI Governor Urjit Patel and his deputies came face to face with government nominee directors -- Economic Affairs Secretary Subhash Chandra Garg and Financial Services Secretary Rajiv Kumar -- and independent members like S Gurumurthy to arrive at a middle ground on some of the contentious issues.

Most of the RBI's 10 independent directors, including Tata Sons Chairman N Chandrasekaran, attended the meeting that had drawn intense media and market attention.

In the run-up to the board meeting, former Finance Minister P Chidambaram said Patel should step down if the board were to issue any direction to it on parting of capital reserves or relaxation of norms.

The RBI's central board currently has 18 members, though the provision is that it can go up to 21.

Amid growing tensions with the central bank, the Finance Ministry had sought discussions under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor.

RBI Deputy Governor Viral Acharya had in a speech last month talked about the independence of the central bank, arguing that any compromise could be "potentially catastrophic" for the economy.

In his first public comments since the spat between the RBI and the Finance Ministry came out in the open, Swadeshi ideologue S Gurumurthy had last week said the stand-off "is not a happy thing at all".

Gurumurthy, who was appointed to the board of RBI a few months back, had said the capital adequacy ratio prescribed in India is 1 per cent higher than the global Basel norms. He also pitched for easing lending norms for small and medium enterprises, which account for 50 per cent of the country's GDP.

Last month, RSS-affiliated Swadeshi Jagran Manch said the RBI Governor should work in sync with the government or resign.

"The Reserve Bank of India Governor should work in sync with the government or otherwise resign," SJM's co-convener Ashwani Mahajan had said. — PTI