New Delhi/Mumbai: The meeting of the board of the Reserve Bank of India has ended after over nine hours, amid what analysts say an atmosphere of mistrust over perceived government interference in the central bank's functioning. RBI agreed to set up a panel for sharing surplus and also to restructure loans of small businesses. Congress president Rahul Gandhi tweeted: "Mr Modi and his coterie of cronies, continue to destroy every institution they can get their hands on. Today, through his puppets at the #RBIBoardMeet he will attempt to destroy the RBI. I hope Mr Patel and his team have a spine and show him his place."
Though the government has maintained it has no intention of forcing the RBI's hand to do its bidding, the opposition has alleged the NDA regime intends to plough into the precious reserves of the central bank in election season. With a heightened sense of alertness, the markets and investors are also closely watching the development.
Any sign that all's not well in the RBI could mean trouble for the markets, analysts say. The first sign of trouble came in October when reports alluded to the government's interest in Section 7 of the Reserve Bank of India Act or RBI Act, which empowers the centre to issue directions to the "lender of last resort" -- meaning the government could take charge of policy. Last year, former RBI Governor D Subbarao said Section 7 has never been used in more than 80 years of the central bank's history.
Here are the highlights of the RBI board meeting and the markets:
Nov 19, 2018 17:15 (IST)
Sudhir Mankad, one of the board members, was seen leaving the RBI building in Mumbai.
Nov 19, 2018 17:08 (IST)
In October, the RBI had pumped around Rs 36,000 crore into the market. RBI has been saying there is enough liquidity in the market.
Nov 19, 2018 13:40 (IST)
Economics Affairs Secretary SC Garg was expected to make a presentation in the board meeting to outline the concerns of the finance ministry and could bring up the question about the transfer of surplus cash reserves held by the RBI, Reuters reported quoting unnamed sources.
Nov 19, 2018 12:59 (IST)
For weeks, government officials have been pressuring the RBI to accede to a range of demands, prompting RBI Deputy Governor Viral Acharya to warn late last month that undermining a central bank's independence could be "catastrophic," bringing the feud into the open.
Nov 19, 2018 12:57 (IST)
S Gurumurthy has been a vocal member on the RBI board asking for easier lending and capital restrictions for banks and more cash for small businesses, a view that is supported by top finance ministry officials and has deepened an ongoing rift between the government and the central bank.
Nov 19, 2018 12:24 (IST)
The 10-year benchmark bond yield was at 7.81 per cent compared with 7.82 at Friday's close, while the rupee was at 71.89 per dollar versus 71.92 on Friday. The broader NSE stock index was little changed at 0.3 per cent.
Nov 19, 2018 12:18 (IST)
Investors are on guard against any escalation of the row between the RBI and government officials, but few are expecting fireworks as both sides have tried to dispel fears of a more serious falling out. That has left traders still anxious to see how far the Reserve Bank of India led by Governor Urjit Patel might be ready to compromise to meet the government's demands.
Nov 19, 2018 11:51 (IST)
The government on November 9 had said it was discussing an "appropriate" size of capital reserves that the central bank must maintain, but denied seeking a massive capital transfer from the Reserve Bank of India led by Governor Urjit Patel.
Nov 19, 2018 11:18 (IST)
Today's RBI board meeting is likely to be a marathon one. The last board meeting on October 23 ran for eight hours, taking up only two out of 12 agenda items, one RBI board member said. The rest will be discussed today, the member told Reuters.
Nov 19, 2018 11:11 (IST)
Of 18 current members in the RBI board, five come from the government bureaucracy, two are finance ministry officials, and two have close links to Prime Minister Narendra Modi and the BJP. Four have a business background, and the other five are Urjit Patel and his four deputy governors.
Nov 19, 2018 11:10 (IST)
In August, S Gurumurthy and Satish Marathe, a former banker who was in the student wing of the BJP, were named to the RBI board. And last month, the government appointed retired bureaucrat Revathy Iyer and Sachin Chaturvedi, head of a Delhi-based think tank, while removing Nachiket Mor, who was close to RBI officials.