RBI board meeting tomorrow: Will it put an end to govt-central bank tiff?

New Delhi, Nov 18: Amid its ongoing standoff with the government, the Reserve Bank of India will hold its crucial board meeting on Monday during which contentious issues are likely to come up for discussion. The Board of Directors of the Reserve Bank of India (RBI) meets every month to discuss inspection reports of banks and systemically important financial entities, and other routine issues of supervision.

According to reports, the government and the RBI seem to have reached an agreeable solution particularly with respect of relaxation of the Prompt Corrective Action (PCA) framework and easing of lending norms for the MSME sector ahead of the board meeting.

Tensions between the central bank and the government have escalated recently, 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.

On Friday, government-nominated board members of RBI, financial services secretary Rajiv Kumar, economic affairs secretary Subhash Chandra Garg, Swadeshi Jagaran Manch convenor S. Gurumurthy, economist Ashok Gulati and RBI officials from Delhi met at North Block.

The closed-door meeting went on for more than three hours at finance minister Arun Jaitley's chamber. Officials from other departments were also called to make their presentations in this meeting with RBI board members and officials.

The last Board meeting on October 23 was reported to be a stormy affair that lasted about eight hours but ended up discussing only three of the 20 items on the agenda. A public speech on October 26 by Deputy Governor Viral Acharya, in which he said governments that do not respect the central bank's independence would incur the wrath of the markets sent the RBI-government relations further downhill.