Govt, RBI board meet: After an unprecedented power tussle over the last few weeks, government and RBI, in a 9-hour long board meeting on Monday, appeared to have reached a common ground on providing relief to MSMEs and easing lending restrictions on a few public sector banks. The marathon meeting between both parties ended on a conciliatory note, as sources told The Indian Express, with the RBI agreeing to form a panel on sharing of surplus capital and restructure loans of small businesses up to Rs 25 crore. In addition, the central bank also announced that it would infuse Rs 8,000 crore into the system through OMOs on November 22.
Here are 9 key points to know
The RBI board has agreed to set up a panel to evaluate the transfer of central bank’s surplus reserves to the government.
The board has also nodded to consider to restructure loans of small businesses up to Rs 25 crore.
It was also decided that the capital adequacy ratio of the banks will be retained at 9 percent.
The board has given extension to the transition period for maintaining a capital conservation buffer (CCB) to 0.625 percent by one year till Mach 2020.
The RBI Board for Financial Supervision (BFS) will also examine the prompt corrective action (PCA) framework.
BFS is expected to release some of the banks from the PCA framework in view of improvement in their operations, The Indian Express reported citing sources.
RBI in its statement after the meeting has said that it will examine the Economic Capital Framework – the amount of surplus reserve a bank holds — “the membership and terms of reference of which will be determined by the Government of India and the RBI”.
The government nominees are said to have argued that the priority at this moment was to boost credit flows to MSMEs and non-bank finance companies (NBFC), The Indian Express reported citing its sources.
Subhash Chandra Garg, Secretary, Department of Economic Affairs and Rajiv Kumar, Secretary, Department of Financial Services, were the government nominees on the board.