New Delhi, November 20: The committee for Reserve Bank of India’s (RBI) capital framework to be formed within a week. The RBI Governor Urijit Patel and Finance Minister Arun Jaitley will together decide the composition of the committee. The central bank has decided the MSME funding details and will issue detailed guidelines today. Yesterday, the board meeting of the RBI was held. The most significant outcome of the meeting was the central bank’s decision to form a panel to review the economic capital framework. The panel would essentially look after the RBI’s capital requirements and negotiate the process for transfer of RBI’s surplus to the government.
The meeting took place after reports of conflict between the government and the RBI on the issue of capital reserves. The topic of lending by state-owned banks and credit to SMEs (small and medium-sized enterprises) were the main issues discussed during the meeting. According to reports, The RBI will inject Rs 8,000 crore into the system through the purchase of government securities on November 22. It is done keeping the liquidity crisis in mind.
In the recent past, tensions between the central bank and the government were escalated, with the Finance Ministry initiating discussions under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor. Meanwhile, chairman of the Parliamentary Standing Committee on Finance Veerappa Moily had earlier said if Patel quits over the stand-off between the top bank and the Centre, it will send a bad signal to global markets.
