RBI vs Centre face-off: Governor Urjit Patel meets PM Narendra Modi to sort out differences

Urjit Patel on Friday reportedly met Prime Minister Narendra Modi to resolve the unprecedented face-off over a range of issues including anonymity of the Central bank.

RBI may create a special dispensation for lending to small and medium enterprises. (Image: PTI)

RBI vs Centre face-off: Amidst the ongoing tussle with the Central government, Reserve Bank of India (RBI) Governor Urjit Patel on Friday reportedly met Prime Minister Narendra Modi to resolve the unprecedented face-off over a range of issues including anonymity of the Central bank. According to a report by news agency PTI, Patel was in the national capital on Friday and have met the PM in a bid to work out a solution on contentious issues that have been the flashpoint between the central bank and the government during the last few weeks. Patel also met other senior officials of the Prime Minister’s Office (PMO). The meetings, which some said also included with the Prime Minister, came amid a face-off between the central bank and the finance ministry over issues ranging from the appropriate size of reserves that RBI must maintain to ease of lending norms to step up growth in an election year. Agency sources also stated that there are indications that the RBI may create a special dispensation for lending to small and medium enterprises, but it was not immediately clear if an agreement has been worked out to ease liquidity situation for non-banking finance companies (NBFCs) and the central bank parting with its substantial part of its surplus. The tussles between the RBI and the government have escalated over the past few weeks with the Finance Ministry initiating discussion under Section 7 of the RBI Act. Section 7 of the RBI act gives power to the government to issue directions to the RBI Governor. In his speech last month RBI Deputy Governor Viral Acharya had spoken about the independence of the central bank, arguing that any compromise could be “potentially catastrophic” for economy of the country. However, the finance ministry cleared its stand on the issue with Economic Affairs Secretary Subhash Chandra Garg refuting to the claims of government has asked the RBI to transfer its surplus reserves of Rs 3.6 lakh crore. He further said the only proposal “under discussion is to fix appropriate economic capital framework of RBI”. Sources said the government nominee directors and a few independent directors could raise the issue of interim dividend along with the capital framework of RBI.