RBI panel to decide on ‘excess’ capital

Shiv Kumar
Tribune News Service
Mumbai, November 19

The Reserve Bank of India (RBI) will set up an expert committee comprising members appointed jointly with the Union Government, the bank said after a nine-hour board meeting on Monday. The committee will look into the "excess" capital supposed to be held by the central bank. 

The government claims that the RBI holds Rs 3,60,000 crore by way of excess capital which should be transferred to it. But RBI officials, including Governor Urjit Patel, have been defending the need for the bank to hold a strong balance sheet to enable the country withstand financial crises and external shocks.

An RBI statement said its Board of Directors discussed the Basel regulatory capital framework which define the need for capital reserves to be held by the central bank and individual financial institutions.

The board also discussed the health of banks, mostly those in the public sector, which have been put under the Prompt Corrective Action (PCA) framework. 

Under this framework, major banks with burgeoning non-performing assets (NPAs) have been forbidden to lend money. The government blames strict norms for the reduction in liquidity.

The RBI board also dealt with a restructuring scheme for stressed enterprises in the medium and small-scale sectors. “ The board advised that the RBI should consider a scheme for restructuring stressed standard assets of MSME borrowers with aggregate credit facilities of up to Rs 250 million, subject to such conditions as are necessary for ensuring financial stability.”

Sources said the next meeting of the board would be held on December 14.