As Prime Minister Narendra Modi’s government turns up the heat on the Reserve Bank of India (RBI) <a href="http://www.wionews.com/india-news/rbi-governor-urjit-patel-could-resign-on-november-19-report-175967">governor</a> to do its bidding ahead of next year’s general election it is getting the central bank’s board to take on a much more powerful role, according to government officials and board members.

Now stacked with government nominees who can be counted on to support the administration, the board is being transformed from having a passive advisory role into a body that can exert pressure for policy change. Some economists fear it could threaten the bank’s independence.

Two board members told Reuters that government pressure for easier lending policies is likely to become abundantly clear at Monday’s board meeting – the first to be held since the extent of a deep rift between the RBI and the government became public knowledge.

With the election due by May, and voters concerned about weak farm incomes and whether enough jobs are being created, Modi’s ruling Bharatiya Janata Party (BJP) is keen to stimulate the economy and sees the RBI’s hawkish stance as a barrier, said government officials and BJP allies.

The government has been pressing the Mumbai-based RBI and Governor Urjit Patel to accede to a range of demands that could help to boost demand. They include making it easier and cheaper for small businesses to borrow, easing lending curbs on 11 state-run banks which had debt and capital adequacy issues, and providing more liquidity to shadow lenders.

They also want the government to have access to surplus reserves the RBI has built up - money that could be used for the administration’s populist programmes including boosts to rural wages, fuel subsidies and buying crops at a guaranteed minimum price.

The RBI has hit back by questioning whether the government wanted to destroy its autonomy and warning that when this happened in Argentina in 2010, financial markets took fright.

The Finance Ministry and RBI spokesmen declined to comment for this story.

SPEARHEADING PUSH

In the past week there have been signs of an uneasy truce as some government officials indicated they didn’t want Patel to resign and would allow some issues to be kicked down the road.

But at the same time, Modi supporters have made it clear they want major policy change, and a senior finance ministry official said some government backers on the board had been given the green light to push hard at Monday’s meeting.

Spearheading that push is new board member S. Gurumurthy, a confidante of Modi’s. He is an accountant and columnist who was until recently co-convenor of the Swadeshi Jagaran Manch, the economic wing of the Hindu nationalist Rashtriya Swayamsevak Sangh, which is the fountainhead of the BJP.

In a speech last week, Gurumurthy lashed out at the RBI's restrictions on bank lending, saying it was damaging the economy.

"We are a bank-driven economy...in a bank-driven economy if you restrict the banks, you are restricting the economy, you are restricting the flow of funds into the economy," he said.

Under the colonial era RBI Act, the government can give the bank directions after consultations with the governor. That law establishes the primacy of the RBI board to do "all acts and things" subject to government directions. It also empowers New Delhi to dismiss any board member - including the governor.

In practice, the government has never invoked those sections of the act. For many decades, RBI governors have enjoyed operational freedom, though they have traditionally worked closely with the government, said an official directly aware of such consultations.

The board also doesn’t have direct influence over interest rate policy. In 2016, Modi agreed to establish a monetary policy committee to set interest rates based on whether India was meeting an inflation target. It consists of three RBI officials and three government-appointed members, with the RBI governor having the casting vote.

"NATIONALIST VISION"

Modi supporters are confident newly appointed members of the RBI board with a "nationalist vision" could over time press it to cut interest rates, transfer surplus funds to the government and ease bank lending curbs.

The RBI board will seek more accountability from the governor, said Ashwani Mahajan, who is co-convenor of the Swadeshi Jagaran Manch.

"Now the RBI will be functioning in a more prudent manner looking at the specific needs of the country," he said. Provided Modi gets re-elected, the RBI board could ensure a greater role for banks "in the social and economic transformation of the country", he added.

PACKED THE BOARD

Modi has packed the RBI board in the past few months with people with links to his party and economists who favour greater government influence over the RBI.

In August, Gurumurthy and Satish Marathe, a former banker who was in the student wing of the BJP, were named to the 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.

It means that of 18 current members, five come from the government bureaucracy, two are finance ministry officials, and two have close links to Modi and the BJP. Four have a business background, and the other five are Patel and his four deputy governors.

Previously, the RBI would usually propose new board members or the government would at least consult the governor before nominating members. Under Modi, there has hardly been any consultation, said one former official directly aware of the appointment process.

In a sign of the marathon meeting that could be in store, the last board meeting on October 23 ran for eight hours, taking up only two out of 12 agenda items, one member said. The rest will be discussed on Monday, this person said.

As Prime Minister Narendra Modi’s government turns up the heat on the Reserve Bank of India (RBI) governor to do its bidding ahead of next year’s general election it is getting the central bank’s board to take on a much more powerful role, according to government officials and board members.

As Prime Minister Narendra Modi’s government turns up the heat on the Reserve Bank of India (RBI) governor to do its bidding ahead of next year’s general election it is getting the central bank’s board to take on a much more powerful role, according to government officials and board members. Now stacked with government nominees who can be counted on to support the administration, the board is being transformed from having a passive advisory role into a body that can exert pressure for policy change. Some economists fear it could threaten the bank’s independence. Two board members told Reuters that government pressure for easier lending policies is likely to become abundantly clear at Monday’s board meeting – the first to be held since the extent of a deep rift between the RBI and the government became public knowledge. With the election due by May, and voters concerned about weak farm incomes and whether enough jobs are being created, Modi’s ruling Bharatiya Janata Party (BJP) is keen to stimulate the economy and sees the RBI’s hawkish stance as a barrier, said government officials and BJP allies. The government has been pressing the Mumbai-based RBI and Governor Urjit Patel to accede to a range of demands that could help to boost demand. They include making it easier and cheaper for small businesses to borrow, easing lending curbs on 11 state-run banks which had debt and capital adequacy issues, and providing more liquidity to shadow lenders. They also want the government to have access to surplus reserves the RBI has built up - money that could be used for the administration’s populist programmes including boosts to rural wages, fuel subsidies and buying crops at a guaranteed minimum price. The RBI has hit back by questioning whether the government wanted to destroy its autonomy and warning that when this happened in Argentina in 2010, financial markets took fright. The Finance Ministry and RBI spokesmen declined to comment for this story. SPEARHEADING PUSH In the past week there have been signs of an uneasy truce as some government officials indicated they didn’t want Patel to resign and would allow some issues to be kicked down the road. But at the same time, Modi supporters have made it clear they want major policy change, and a senior finance ministry official said some government backers on the board had been given the green light to push hard at Monday’s meeting. Spearheading that push is new board member S. Gurumurthy, a confidante of Modi’s. He is an accountant and columnist who was until recently co-convenor of the Swadeshi Jagaran Manch, the economic wing of the Hindu nationalist Rashtriya Swayamsevak Sangh, which is the fountainhead of the BJP. In a speech last week, Gurumurthy lashed out at the RBI's restrictions on bank lending, saying it was damaging the economy. "We are a bank-driven economy...in a bank-driven economy if you restrict the banks, you are restricting the economy, you are restricting the flow of funds into the economy," he said. Under the colonial era RBI Act, the government can give the bank directions after consultations with the governor. That law establishes the primacy of the RBI board to do "all acts and things" subject to government directions. It also empowers New Delhi to dismiss any board member - including the governor. In practice, the government has never invoked those sections of the act. For many decades, RBI governors have enjoyed operational freedom, though they have traditionally worked closely with the government, said an official directly aware of such consultations. The board also doesn’t have direct influence over interest rate policy. In 2016, Modi agreed to establish a monetary policy committee to set interest rates based on whether India was meeting an inflation target. It consists of three RBI officials and three government-appointed members, with the RBI governor having the casting vote. "NATIONALIST VISION" Modi supporters are confident newly appointed members of the RBI board with a "nationalist vision" could over time press it to cut interest rates, transfer surplus funds to the government and ease bank lending curbs. The RBI board will seek more accountability from the governor, said Ashwani Mahajan, who is co-convenor of the Swadeshi Jagaran Manch. "Now the RBI will be functioning in a more prudent manner looking at the specific needs of the country," he said. Provided Modi gets re-elected, the RBI board could ensure a greater role for banks "in the social and economic transformation of the country", he added. PACKED THE BOARD Modi has packed the RBI board in the past few months with people with links to his party and economists who favour greater government influence over the RBI. In August, Gurumurthy and Satish Marathe, a former banker who was in the student wing of the BJP, were named to the 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. It means that of 18 current members, five come from the government bureaucracy, two are finance ministry officials, and two have close links to Modi and the BJP. Four have a business background, and the other five are Patel and his four deputy governors. Previously, the RBI would usually propose new board members or the government would at least consult the governor before nominating members. Under Modi, there has hardly been any consultation, said one former official directly aware of the appointment process. In a sign of the marathon meeting that could be in store, the last board meeting on October 23 ran for eight hours, taking up only two out of 12 agenda items, one member said. The rest will be discussed on Monday, this person said.

Govt pressure on RBI will become abundantly clear in Monday meeting: Board members

India's government and its central bank are getting close to ironing out some of their policy differences, said two sources familiar with the discussions, as they seek to defuse worsening tensions that had threatened to unnerve investors.

While the rift is far from healed, the sources said enough progress had been made to avoid acrimony at a board meeting of the Reserve Bank of India (RBI) next Monday.

The threat that <a href="http://www.wionews.com/business-economy/rbi-governor-urjit-patel-met-pm-modi-on-november-9-possibly-to-sort-out-differences-with-centre-176983">RBI Governor Urjit Patel</a> would quit, as reported by some newspapers last week, is also thought to be off the table for now, they said.

The uneasy truce is likely to see the RBI ease up on some lending restrictions to help the government stimulate the economy, said the sources. One source said the RBI could agree to tweak restrictions on lending to improve credit flows for smaller companies with a borrowing limit of 250 million rupees ($3.4 million).

Neither the RBI nor the finance ministry responded to requests for comment for this article. The prime minister’s office declined to comment.

It is unclear how much of a role Prime Minister Narendra Modi played in defusing the tension. Local media reported that Modi met Patel last week in an attempt to sort out the contentious issues but officials in the prime minister`s office and the RBI said they did not know of such a meeting.

Modi had appointed Patel as the RBI governor in 2016 for a three-year term that ends in September next year.

For weeks, government officials in New Delhi have been pressuring the Mumbai-based RBI to accede to a range of demands, from easing lending curbs to handing over surplus reserves to the government. This prompted 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.

Tensions were expected to come to a head at Monday`s meeting as government representatives on the board appeared to be ready to turn up the heat on Patel and accuse the RBI of being intransigent in the face of government demands.&nbsp;

Now, it seems likely there will be a more constructive atmosphere with agreement on some issues, and disputed questions shelved for another day, the sources said.

Can't agree to everything

The government is keen to provide more stimulus to the economy heading into next year`s election, especially as the incomes of many farmers have been hit by low crop prices. At the same time it doesn`t want a bust-up with the central bank, which could badly affect investor sentiment and provide political fodder to the opposition Congress party.

"The government understands the regulator will remain a regulator and can`t agree to all demands," said a government official, who declined to be named, referring to the RBI.&nbsp;

While the official did not give any details of the solutions being worked out with the RBI, he acknowledged that the government did not want to trigger Patel`s departure at such a sensitive time.&nbsp;

There are five key state elections in the next few weeks and a general election due by May. The Congress party has already been harrying the government over allegations of corruption in a military jet deal with France and infighting between the top officials of the Central Bureau of Investigation (CBI).

A RBI board member said that helping to ease tensions was the idea that both sides wanted a healthy economy. It was just a question of how to get there. "The main issue is how to boost credit growth," the member said referring to the credit crunch facing small companies.&nbsp;

Economics Affairs Secretary S.C. Garg is 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, the sources said.

The board member said that an expert panel may be set up to work out the appropriate level of contingency reserves for the RBI, effectively kicking that question down the road. The RBI introduced a so-called corrective action plan in 2014 for 11 state-run banks with bad loan issues and depleted capital. That plan included curbs on risky lending and RBI officials said, as a result, the banks` loan growth fell to zero and had remained there since 2016, from 10 percent in 2014.&nbsp;

&nbsp;According to the RBI board member, the government wants the RBI to ease those curbs and lower capital requirements for the 11.&nbsp;

Some improvements in the balance sheets of those lenders might give the RBI leeway to do that, although the RBI would prefer to give the mending process more time, said another official who is aware of discussions within the central bank. 
 
&nbsp;

India's government and its central bank are getting close to ironing out some of their policy differences, said two sources familiar with the discussions, as they seek to defuse worsening tensions that had threatened to unnerve investors.

India's government and its central bank are getting close to ironing out some of their policy differences, said two sources familiar with the discussions, as they seek to defuse worsening tensions that had threatened to unnerve investors. While the rift is far from healed, the sources said enough progress had been made to avoid acrimony at a board meeting of the Reserve Bank of India (RBI) next Monday. The threat that RBI Governor Urjit Patel would quit, as reported by some newspapers last week, is also thought to be off the table for now, they said. The uneasy truce is likely to see the RBI ease up on some lending restrictions to help the government stimulate the economy, said the sources. One source said the RBI could agree to tweak restrictions on lending to improve credit flows for smaller companies with a borrowing limit of 250 million rupees ($3.4 million). Neither the RBI nor the finance ministry responded to requests for comment for this article. The prime minister’s office declined to comment. It is unclear how much of a role Prime Minister Narendra Modi played in defusing the tension. Local media reported that Modi met Patel last week in an attempt to sort out the contentious issues but officials in the prime minister`s office and the RBI said they did not know of such a meeting. Modi had appointed Patel as the RBI governor in 2016 for a three-year term that ends in September next year. For weeks, government officials in New Delhi have been pressuring the Mumbai-based RBI to accede to a range of demands, from easing lending curbs to handing over surplus reserves to the government. This prompted 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. Tensions were expected to come to a head at Monday`s meeting as government representatives on the board appeared to be ready to turn up the heat on Patel and accuse the RBI of being intransigent in the face of government demands. Now, it seems likely there will be a more constructive atmosphere with agreement on some issues, and disputed questions shelved for another day, the sources said. Can't agree to everything The government is keen to provide more stimulus to the economy heading into next year`s election, especially as the incomes of many farmers have been hit by low crop prices. At the same time it doesn`t want a bust-up with the central bank, which could badly affect investor sentiment and provide political fodder to the opposition Congress party. "The government understands the regulator will remain a regulator and can`t agree to all demands," said a government official, who declined to be named, referring to the RBI. While the official did not give any details of the solutions being worked out with the RBI, he acknowledged that the government did not want to trigger Patel`s departure at such a sensitive time. There are five key state elections in the next few weeks and a general election due by May. The Congress party has already been harrying the government over allegations of corruption in a military jet deal with France and infighting between the top officials of the Central Bureau of Investigation (CBI). A RBI board member said that helping to ease tensions was the idea that both sides wanted a healthy economy. It was just a question of how to get there. "The main issue is how to boost credit growth," the member said referring to the credit crunch facing small companies. Economics Affairs Secretary S.C. Garg is 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, the sources said. The board member said that an expert panel may be set up to work out the appropriate level of contingency reserves for the RBI, effectively kicking that question down the road. The RBI introduced a so-called corrective action plan in 2014 for 11 state-run banks with bad loan issues and depleted capital. That plan included curbs on risky lending and RBI officials said, as a result, the banks` loan growth fell to zero and had remained there since 2016, from 10 percent in 2014. According to the RBI board member, the government wants the RBI to ease those curbs and lower capital requirements for the 11. Some improvements in the balance sheets of those lenders might give the RBI leeway to do that, although the RBI would prefer to give the mending process more time, said another official who is aware of discussions within the central bank.

Modi government, RBI close to ironing out policy differences: Sources

India's government and its central bank are getting close to ironing out some of their policy differences, said two sources familiar with the discussions, as they seek to defuse worsening tensions that had threatened to unnerve investors.

While the rift is far from healed, the sources said enough progress had been made to avoid acrimony at a board meeting of the Reserve Bank of India (RBI) next Monday. The threat that RBI <a href="http://www.wionews.com/india-news/rbi-governor-urjit-patel-may-consider-resigning-after-rift-with-government-report-174513">Governor Urjit Patel would quit</a>, as reported by some newspapers last week, is also thought to be off the table, for now, they said.

The uneasy truce is likely to see the RBI ease up on some lending restrictions to help the government stimulate the economy, said the sources. One source said the RBI could agree to tweak restrictions on lending to improve credit flows for smaller companies with a borrowing limit of 250 million rupees ($3.4 million).

Neither the RBI nor the finance ministry responded to requests for comment for this article. The prime minister’s office declined to comment.&nbsp;

It is unclear how much of a role Prime Minister Narendra Modi played in defusing the tension. Local media reported that Modi met Patel last week in an attempt to sort out the contentious issues but officials in the prime minister`s office and the RBI said they did not know of such a meeting.&nbsp;

Modi had appointed Patel as the RBI governor in 2016 for a three-year term that ends in September next year.&nbsp;

For weeks, government officials in New Delhi have been pressuring the Mumbai-based RBI to accede to a range of demands, from easing lending curbs to handing over surplus reserves to the government. This prompted 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.&nbsp;

Tensions were expected to come to a head at Monday`s meeting as government representatives on the board appeared to be ready to turn up the heat on Patel and accuse the RBI of being intransigent in the face of government demands. &nbsp;

Now, it seems likely there will be a more constructive atmosphere with agreement on some issues, and disputed questions shelved for another day, the sources said.

CAN'T AGREE TO EVERYTHING

The government is keen to provide more stimulus to the economy heading into next year`s election, especially as the incomes of many farmers have been hit by low crop prices. At the same time, it doesn`t want a bust-up with the central bank, which could badly affect investor sentiment and provide political fodder to the opposition Congress party. 
"The government understands the regulator will remain a regulator and can`t agree to all demands," said a government official, who declined to be named, referring to the RBI.&nbsp;

While the official did not give any details of the solutions being worked out with the RBI, he acknowledged that the government did not want to trigger Patel`s departure at such a sensitive time.&nbsp;

There are five key state elections in the next few weeks and a general election due by May. The Congress party has already been harrying the government over allegations of corruption in a military jet deal with France and infighting between the top officials of the Central Bureau of Investigation (CBI).&nbsp;

An RBI board member said that helping to ease tensions was the idea that both sides wanted a healthy economy. It was just a question of how to get there. "The main issue is how to boost credit growth," the member said referring to the credit crunch facing small companies.&nbsp;

Economics Affairs Secretary S.C. Garg is 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, the sources said.&nbsp;

The board member said that an expert panel may be set up to work out the appropriate level of contingency reserves for the RBI, effectively kicking that question down the road. The RBI introduced a so-called corrective action plan in 2014 for 11 state-run banks with bad loan issues and depleted capital. That plan included curbs on risky lending and RBI officials said, as a result, the banks` loan growth fell to zero and had remained there since 2016, from 10 per cent in 2014.&nbsp;

According to the RBI board member, the government wants the RBI to ease those curbs and lower capital requirements for the 11. &nbsp;

Some improvements in the balance sheets of those lenders might give the RBI leeway to do that, although the RBI would prefer to give the mending process more time, said another official who is aware of discussions within the central bank.

India's government and its central bank are getting close to ironing out some of their policy differences, said two sources familiar with the discussions, as they seek to defuse worsening tensions that had threatened to unnerve investors. While the rift is far from healed, the sources said enough progress had been made to avoid acrimony at a board meeting of the Reserve Bank of India (RBI) next Monday. The threat that RBI Governor Urjit Patel would quit, as reported by some newspapers last week, is also thought to be off the table, for now, they said. The uneasy truce is likely to see the RBI ease up on some lending restrictions to help the government stimulate the economy, said the sources. One source said the RBI could agree to tweak restrictions on lending to improve credit flows for smaller companies with a borrowing limit of 250 million rupees ($3.4 million). Neither the RBI nor the finance ministry responded to requests for comment for this article. The prime minister’s office declined to comment. It is unclear how much of a role Prime Minister Narendra Modi played in defusing the tension. Local media reported that Modi met Patel last week in an attempt to sort out the contentious issues but officials in the prime minister`s office and the RBI said they did not know of such a meeting. Modi had appointed Patel as the RBI governor in 2016 for a three-year term that ends in September next year. For weeks, government officials in New Delhi have been pressuring the Mumbai-based RBI to accede to a range of demands, from easing lending curbs to handing over surplus reserves to the government. This prompted 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. Tensions were expected to come to a head at Monday`s meeting as government representatives on the board appeared to be ready to turn up the heat on Patel and accuse the RBI of being intransigent in the face of government demands. Now, it seems likely there will be a more constructive atmosphere with agreement on some issues, and disputed questions shelved for another day, the sources said. CAN'T AGREE TO EVERYTHING The government is keen to provide more stimulus to the economy heading into next year`s election, especially as the incomes of many farmers have been hit by low crop prices. At the same time, it doesn`t want a bust-up with the central bank, which could badly affect investor sentiment and provide political fodder to the opposition Congress party. "The government understands the regulator will remain a regulator and can`t agree to all demands," said a government official, who declined to be named, referring to the RBI. While the official did not give any details of the solutions being worked out with the RBI, he acknowledged that the government did not want to trigger Patel`s departure at such a sensitive time. There are five key state elections in the next few weeks and a general election due by May. The Congress party has already been harrying the government over allegations of corruption in a military jet deal with France and infighting between the top officials of the Central Bureau of Investigation (CBI). An RBI board member said that helping to ease tensions was the idea that both sides wanted a healthy economy. It was just a question of how to get there. "The main issue is how to boost credit growth," the member said referring to the credit crunch facing small companies. Economics Affairs Secretary S.C. Garg is 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, the sources said. The board member said that an expert panel may be set up to work out the appropriate level of contingency reserves for the RBI, effectively kicking that question down the road. The RBI introduced a so-called corrective action plan in 2014 for 11 state-run banks with bad loan issues and depleted capital. That plan included curbs on risky lending and RBI officials said, as a result, the banks` loan growth fell to zero and had remained there since 2016, from 10 per cent in 2014. According to the RBI board member, the government wants the RBI to ease those curbs and lower capital requirements for the 11. Some improvements in the balance sheets of those lenders might give the RBI leeway to do that, although the RBI would prefer to give the mending process more time, said another official who is aware of discussions within the central bank.

Govt, RBI nearing truce, threat of Urjit Patel resigning off table: Sources

RBI Governor Urjit Patel is believed to have met Prime Minister Narendra Modi last week in a bid to work out a solution on contentious issues that have been flash point between the central bank and the government during the last few weeks.

Sources said Patel was in the national capital on Friday and met senior officials in 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.

Sources said 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 RBI parting with its substantial part of its surplus.

Tensions between the RBI and the government have escalated recently, with the Finance Ministry initiating discussion under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor.

RBI Deputy Governor Viral Acharya had in a speech last month talked about the independence of the central bank, arguing that any compromise could be "potentially catastrophic" for the economy.

Last week, Economic Affairs Secretary Subhash Chandra Garg had said the government was not in any dire need of funds and that there was no proposal to ask the RBI to transfer Rs 3.6 lakh crore.

He further said the only proposal "under discussion is to fix appropriate economic capital framework of RBI".

Economic capital framework refers to the risk capital required by the central bank while taking into account different risks. The Reserve Bank of India (RBI) has a massive Rs 9.59 lakh crore reserves.

Patel's meetings at the PMO came days before the RBI's crucial board meeting on November 19 during which contentious issues are likely to come up for discussion.

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.

However, any change in the central bank's economic capital framework can be carried out only after making amendments to the RBI Act, 1934.

Other issues which could be raised include alignment of capital adequacy norms with those in advanced countries and some relaxation in the Prompt Corrective Action framework, sources said, adding more measures to enhance lending to MSMEs and NBFCs may also be discussed.

RBI Governor Urjit Patel is believed to have met Prime Minister Narendra Modi last week in a bid to work out a solution on contentious issues that have been flash point between the central bank and the government during the last few weeks.

RBI Governor Urjit Patel is believed to have met Prime Minister Narendra Modi last week in a bid to work out a solution on contentious issues that have been flash point between the central bank and the government during the last few weeks. Sources said Patel was in the national capital on Friday and met senior officials in 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. Sources said 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 RBI parting with its substantial part of its surplus. Tensions between the RBI and the government have escalated recently, with the Finance Ministry initiating discussion under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor. RBI Deputy Governor Viral Acharya had in a speech last month talked about the independence of the central bank, arguing that any compromise could be "potentially catastrophic" for the economy. Last week, Economic Affairs Secretary Subhash Chandra Garg had said the government was not in any dire need of funds and that there was no proposal to ask the RBI to transfer Rs 3.6 lakh crore. He further said the only proposal "under discussion is to fix appropriate economic capital framework of RBI". Economic capital framework refers to the risk capital required by the central bank while taking into account different risks. The Reserve Bank of India (RBI) has a massive Rs 9.59 lakh crore reserves. Patel's meetings at the PMO came days before the RBI's crucial board meeting on November 19 during which contentious issues are likely to come up for discussion. 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. However, any change in the central bank's economic capital framework can be carried out only after making amendments to the RBI Act, 1934. Other issues which could be raised include alignment of capital adequacy norms with those in advanced countries and some relaxation in the Prompt Corrective Action framework, sources said, adding more measures to enhance lending to MSMEs and NBFCs may also be discussed.

RBI Governor Urjit Patel had met PM Modi possibly to sort out differences with Centre

The current tussle between the Central Government and the Reserve Bank of India (RBI) has brought into focus the issue of autonomy of the central bank in operationalising its monetary policy. While the RBI wants to bring in more discipline into banks’ lending operations, the Centre wants a greater share of the RBI’s surplus and has also criticised the central bank for being too conservative on lending restrictions, thereby tightening liquidity especially for Non-Banking Finance Companies (NBFCs).

Central banks were initially opened as bankers to the government. They held the government’s tax revenues, non-tax revenues and loans. Over time, these banks were nationalised and brought fully under government control. In later years, it became evident that the central bank, being a banker to the government, had an information advantage over other banks. It could use that information advantage to regulate the activities of other banks to reduce possibilities of moral hazard and adverse selection – the two most important market failures in the financial sector. Even later, it evolved into a banker to the banks and a lender of last resort. By standing as a guarantee to other banks, the central bank brought trust into the banking system and reduced bank runs.

The RBI came into existence in 1935 based on the recommendations of the Hilton-Young Commission. It is governed by the Reserve Bank of India Act, 1934. Although it was initially owned by private shareholders, it was nationalised in 1949 after India’s Independence. Prior to the 1991 reforms, the RBI enjoyed very little autonomy vis-a-vis the government. It was primarily responsible for monetising the government budget deficit. At the same time, it was accused of keeping interest rates deliberately low to reduce the government’s interest payments. This period was therefore called the period of fiscal dominance.

Post the reforms of 1991, the RBI gained considerable autonomy. The automatic monetisation of the fiscal deficit was phased out between 1993 and 1997. The FRBM Act further gave statutory backing to this restricted application of monetization of debt. There was also a move towards market-determined tools like interest rates and open market operations (OMOs) for administering monetary policy, instead of statutory controls like the Cash Reserve Ratio (CRR).

The recent move towards inflation targeting is another attempt at granting more autonomy and accountability to the RBI. The RBI can now use any tool at its disposal to achieve an inflation rate of 2-6 per cent. However, it will be answerable for its failure to do so.

Yet, considerable issues remain to be resolved. First, the RBI manages the government’s debt and also sets the benchmark interest rates. This leads to a conflict of interest. Second, the RBI’s ability to regulate Public Sector Banks (PSBs) is limited by the fact that both the RBI and the PSBs are government owned and again, there is a conflict of interest. Finally, excessive focus on inflation targeting can make the RBI’s approach to monetary policy too conservative, hurting investment prospects.

Thus, there is an urgent need to resolve these issues. A committee of experts from the banking sector, RBI and the government can be constituted. 
 
(This article was originally published on DNA. Read the <a href="https://www.dnaindia.com/analysis/column-evolution-of-central-banking-in-india-2684415">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

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The current tussle between the Central Government and the Reserve Bank of India (RBI) has brought into focus the issue of autonomy of the central bank in operationalising its monetary policy.

The current tussle between the Central Government and the Reserve Bank of India (RBI) has brought into focus the issue of autonomy of the central bank in operationalising its monetary policy. While the RBI wants to bring in more discipline into banks’ lending operations, the Centre wants a greater share of the RBI’s surplus and has also criticised the central bank for being too conservative on lending restrictions, thereby tightening liquidity especially for Non-Banking Finance Companies (NBFCs). Central banks were initially opened as bankers to the government. They held the government’s tax revenues, non-tax revenues and loans. Over time, these banks were nationalised and brought fully under government control. In later years, it became evident that the central bank, being a banker to the government, had an information advantage over other banks. It could use that information advantage to regulate the activities of other banks to reduce possibilities of moral hazard and adverse selection – the two most important market failures in the financial sector. Even later, it evolved into a banker to the banks and a lender of last resort. By standing as a guarantee to other banks, the central bank brought trust into the banking system and reduced bank runs. The RBI came into existence in 1935 based on the recommendations of the Hilton-Young Commission. It is governed by the Reserve Bank of India Act, 1934. Although it was initially owned by private shareholders, it was nationalised in 1949 after India’s Independence. Prior to the 1991 reforms, the RBI enjoyed very little autonomy vis-a-vis the government. It was primarily responsible for monetising the government budget deficit. At the same time, it was accused of keeping interest rates deliberately low to reduce the government’s interest payments. This period was therefore called the period of fiscal dominance. Post the reforms of 1991, the RBI gained considerable autonomy. The automatic monetisation of the fiscal deficit was phased out between 1993 and 1997. The FRBM Act further gave statutory backing to this restricted application of monetization of debt. There was also a move towards market-determined tools like interest rates and open market operations (OMOs) for administering monetary policy, instead of statutory controls like the Cash Reserve Ratio (CRR). The recent move towards inflation targeting is another attempt at granting more autonomy and accountability to the RBI. The RBI can now use any tool at its disposal to achieve an inflation rate of 2-6 per cent. However, it will be answerable for its failure to do so. Yet, considerable issues remain to be resolved. First, the RBI manages the government’s debt and also sets the benchmark interest rates. This leads to a conflict of interest. Second, the RBI’s ability to regulate Public Sector Banks (PSBs) is limited by the fact that both the RBI and the PSBs are government owned and again, there is a conflict of interest. Finally, excessive focus on inflation targeting can make the RBI’s approach to monetary policy too conservative, hurting investment prospects. Thus, there is an urgent need to resolve these issues. A committee of experts from the banking sector, RBI and the government can be constituted. (This article was originally published on DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Evolution of central banking in India

Reserve Bank of India (RBI) Governor <a href="http://www.wionews.com/business-economy/rbi-head-should-work-with-government-or-quit-says-rss-official-174773">Urjit Patel could resign</a> at the central bank's next board meeting on November 19, online financial publication Moneylife reported on Wednesday, citing sources in touch with the governor.

The government and RBI have been <a href="http://www.wionews.com/business-economy/govt-to-continue-pressing-rbi-for-relaxing-norms-funds-sources-175945">fighting for weeks</a> over how much autonomy the RBI should have as the administration of Prime Minister Narendra Modi seeks to reduce curbs on lending and to gain access to the RBI's surplus reserves.

The rift worsened late last month when one of the bank's deputy governors said in a speech that undermining central bank independence could be “potentially catastrophic”.

Moneylife's report said if the feud escalates further, there is "a good chance" Patel will resign at the RBI's next meeting, saying he was tired of the struggle with the government, and it was having a negative impact on his health.

The report did not cite the number of sources. The RBI did not immediately respond to a request for comment.

The story was written by veteran Indian financial journalist Sucheta Dalal who is well known for her investigative reporting. She is one of the founders of Moneylife.

Reuters reported on Tuesday that the government intends to keep pressing its demands even if it risks provoking a resignation by Patel, according to three sources familiar with the government's thinking.

Reserve Bank of India (RBI) Governor Urjit Patel could resign at the central bank's next board meeting on November 19, online financial publication Moneylife reported on Wednesday, citing sources in touch with the governor.

Reserve Bank of India (RBI) Governor Urjit Patel could resign at the central bank's next board meeting on November 19, online financial publication Moneylife reported on Wednesday, citing sources in touch with the governor. The government and RBI have been fighting for weeks over how much autonomy the RBI should have as the administration of Prime Minister Narendra Modi seeks to reduce curbs on lending and to gain access to the RBI's surplus reserves. The rift worsened late last month when one of the bank's deputy governors said in a speech that undermining central bank independence could be “potentially catastrophic”. Moneylife's report said if the feud escalates further, there is "a good chance" Patel will resign at the RBI's next meeting, saying he was tired of the struggle with the government, and it was having a negative impact on his health. The report did not cite the number of sources. The RBI did not immediately respond to a request for comment. The story was written by veteran Indian financial journalist Sucheta Dalal who is well known for her investigative reporting. She is one of the founders of Moneylife. Reuters reported on Tuesday that the government intends to keep pressing its demands even if it risks provoking a resignation by Patel, according to three sources familiar with the government's thinking.

RBI governor Urjit Patel could resign on November 19: Report

The government intends to <a href="http://www.wionews.com/business-economy/govt-to-continue-pressing-rbi-for-relaxing-norms-funds-sources-175945">keep pressing demands</a> for the country's central bank to relax lending curbs and hand over surplus reserves even if it risks provoking a <a href="http://www.wionews.com/india-news/rbi-governor-urjit-patel-could-resign-on-november-19-report-175967">resignation by the bank's governor</a>, three sources familiar with the government's thinking told Reuters.

While there appeared to be a partial truce last week when the government said it respected the autonomy of the Reserve Bank of India (RBI), the sources said the government will turn up the heat at the bank's central board of directors meeting on Nov. 19.

And RBI Governor Urjit Patel will be a key focus of the pressure from a group of directors who support the government's position, according to the New Delhi-based sources, who declined to be named due to the sensitivity of the matter.

"We want the RBI governor to accept the priorities of the economy and to discuss these with board members," said one of the sources, a senior government official with direct knowledge of deliberations. "If he wants to take decisions unilaterally, it will be better for him to quit."

Investors and traders warn that if Patel quits it will create uncertainty and undermine India's already-weak financial markets. They have been hurt in recent weeks because of defaults by a major financing company.

A Finance Ministry spokesman declined to comment for this story.

The online financial publication Moneylife reported on Wednesday that Patel could resign at the central bank's next board meeting on Nov. 19, citing sources in touch with the governor.

Moneylife said that Patel was tired of the struggle with the government, and it was having a negative impact on his health.

The RBI did not respond to requests for comment for this article or in response to the Moneylife report.

'POTENTIALLY CATASTROPHIC'

Tensions between the two sides came to the fore last month when RBI Deputy Governor Viral Acharya gave a speech that blew the lid off a fractious dispute between the bank and the government of Prime Minister Narendra Modi on issues ranging from lending curbs to who controls the institution's reserves.

Acharya said that undermining central bank independence could be “potentially catastrophic”, and he even cited meddling by the Argentine government in the affairs of its central bank in 2010 – prompting big drops in that nation’s financial markets - as a sign of how bad things can get.

For its part, government officials say they have been increasingly frustrated by the intransigence of Patel and his team to address its demands and engage in constructive dialogue.

The RBI has consistently pushed back against calls from the government to hand over more money from its reserves to help fund the fiscal deficit.

The ruling Hindu nationalist Bharatiya Janata Party is also keen to reduce curbs on the shadow banking sector and increase overall lending to small and medium-sized businesses. The aim is to help offset economic headwinds from low farm prices and high fuel prices ahead of a general election due by next May and key state elections in a few weeks.

"We will do everything to protect the interests of the economy," one of the members of the RBI central board told Reuters, noting the governor and his team would have to "explain, defend and justify" their decisions at the board meeting.

It is unclear, though, how the government will seek to exert pressure through the RBI's Central Board as the body is a largely symbolic one, which has never had a direct say in the bank's directives and policies, according to two additional sources with knowledge of the law under which the central bank operates.

"The role of the board has typically been to supervise the workings of the RBI, like internal audit and recruitment. But the RBI is not really accountable to the board for regulatory and operational issues," said one of the sources, saying this would only change if the government invokes Section 7 of the RBI Act allowing it to dictate policy to the central bank.

"We don't know whether the board will supersede the RBI in that case," said the source. "This kind of situation has never arisen before."

Still, the government sources say they will find ways to increase pressure on the RBI and Patel via the board before moving to invoke Section 7.

"Patel and his team must recognise the period of an invisible RBI board is over," one of the New Delhi-based sources said, noting that the RBI will sooner or later have to fall in line.

Patel's predecessor Raghuram Rajan defended the RBI's call for autonomy saying that the central bank's responsibility is to secure financial stability and it has the right to say "no" to government proposals that could lead to instability.

"The RBI is something like a seatbelt," Rajan, who is a professor at the University of Chicago Booth School of Business, told CNBC-TV18.

"As a driver, being the government, it has the possibility of not putting on the seatbelt, but of course, if you don’t put on the seatbelt, you can get into an accident which can be quite severe."

N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a New Delhi-based think tank, partly funded by the finance ministry, said the RBI and the government were dealing with the same problem though there was a difference of opinion on how to solve it.

"While the government is looking for short-term solutions, the RBI is focused on long-term solutions," he said, adding that despite disagreements, both could resolve their differences.

"If the RBI governor is forced to resign, it will be a huge setback for the economy."

The government intends to keep pressing demands for the country's central bank to relax lending curbs and hand over surplus reserves even if it risks provoking a resignation by the bank's governor, three sources familiar with the government's thinking told Reuters.

The government intends to keep pressing demands for the country's central bank to relax lending curbs and hand over surplus reserves even if it risks provoking a resignation by the bank's governor, three sources familiar with the government's thinking told Reuters. While there appeared to be a partial truce last week when the government said it respected the autonomy of the Reserve Bank of India (RBI), the sources said the government will turn up the heat at the bank's central board of directors meeting on Nov. 19. And RBI Governor Urjit Patel will be a key focus of the pressure from a group of directors who support the government's position, according to the New Delhi-based sources, who declined to be named due to the sensitivity of the matter. "We want the RBI governor to accept the priorities of the economy and to discuss these with board members," said one of the sources, a senior government official with direct knowledge of deliberations. "If he wants to take decisions unilaterally, it will be better for him to quit." Investors and traders warn that if Patel quits it will create uncertainty and undermine India's already-weak financial markets. They have been hurt in recent weeks because of defaults by a major financing company. A Finance Ministry spokesman declined to comment for this story. The online financial publication Moneylife reported on Wednesday that Patel could resign at the central bank's next board meeting on Nov. 19, citing sources in touch with the governor. Moneylife said that Patel was tired of the struggle with the government, and it was having a negative impact on his health. The RBI did not respond to requests for comment for this article or in response to the Moneylife report. 'POTENTIALLY CATASTROPHIC' Tensions between the two sides came to the fore last month when RBI Deputy Governor Viral Acharya gave a speech that blew the lid off a fractious dispute between the bank and the government of Prime Minister Narendra Modi on issues ranging from lending curbs to who controls the institution's reserves. Acharya said that undermining central bank independence could be “potentially catastrophic”, and he even cited meddling by the Argentine government in the affairs of its central bank in 2010 – prompting big drops in that nation’s financial markets - as a sign of how bad things can get. For its part, government officials say they have been increasingly frustrated by the intransigence of Patel and his team to address its demands and engage in constructive dialogue. The RBI has consistently pushed back against calls from the government to hand over more money from its reserves to help fund the fiscal deficit. The ruling Hindu nationalist Bharatiya Janata Party is also keen to reduce curbs on the shadow banking sector and increase overall lending to small and medium-sized businesses. The aim is to help offset economic headwinds from low farm prices and high fuel prices ahead of a general election due by next May and key state elections in a few weeks. "We will do everything to protect the interests of the economy," one of the members of the RBI central board told Reuters, noting the governor and his team would have to "explain, defend and justify" their decisions at the board meeting. It is unclear, though, how the government will seek to exert pressure through the RBI's Central Board as the body is a largely symbolic one, which has never had a direct say in the bank's directives and policies, according to two additional sources with knowledge of the law under which the central bank operates. "The role of the board has typically been to supervise the workings of the RBI, like internal audit and recruitment. But the RBI is not really accountable to the board for regulatory and operational issues," said one of the sources, saying this would only change if the government invokes Section 7 of the RBI Act allowing it to dictate policy to the central bank. "We don't know whether the board will supersede the RBI in that case," said the source. "This kind of situation has never arisen before." Still, the government sources say they will find ways to increase pressure on the RBI and Patel via the board before moving to invoke Section 7. "Patel and his team must recognise the period of an invisible RBI board is over," one of the New Delhi-based sources said, noting that the RBI will sooner or later have to fall in line. Patel's predecessor Raghuram Rajan defended the RBI's call for autonomy saying that the central bank's responsibility is to secure financial stability and it has the right to say "no" to government proposals that could lead to instability. "The RBI is something like a seatbelt," Rajan, who is a professor at the University of Chicago Booth School of Business, told CNBC-TV18. "As a driver, being the government, it has the possibility of not putting on the seatbelt, but of course, if you don’t put on the seatbelt, you can get into an accident which can be quite severe." N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a New Delhi-based think tank, partly funded by the finance ministry, said the RBI and the government were dealing with the same problem though there was a difference of opinion on how to solve it. "While the government is looking for short-term solutions, the RBI is focused on long-term solutions," he said, adding that despite disagreements, both could resolve their differences. "If the RBI governor is forced to resign, it will be a huge setback for the economy."

Government set to turn up heat on RBI Governor Urjit Patel: Sources

The Reserve Bank of India governor should work in sync with the nation's government to support economic growth or he <a href="http://www.wionews.com/india-news/rbi-governor-urjit-patel-may-consider-resigning-after-rift-with-government-report-174513">should resign</a>, said the head of the economic wing of Rashtriya Swayamsevak Sangh.

<a href="http://www.wionews.com/india-news/a-govt-that-does-not-respect-rbis-independence-will-incur-wrath-of-markets-rbi-deputy-governor-173752">RBI Governor</a> Urjit Patel should also "restrain his officials from making differences public," said the RSS official, Ashwani Mahajan, in an interview on Wednesday. "If he doesn't follow discipline it would be better for him to resign," he added.

Mahajan is chief of the RSS's Swadeshi Jagran Manch (SJM) economic group.

Earlier in the day, some local TV channels reported that Patel could consider resigning from his post given a breakdown in relations with the government, sparking a sell-off in the rupee and bonds.

Tensions between the RBI and the government have become increasingly public after the bank's Deputy Governor Viral Acharya said last Friday night that undermining central bank independence could be "potentially catastrophic".

His comments indicated that the RBI was pushing back against government pressure to relax its policies and reduce its powers ahead of a general election due by May.

In a statement, the government said on Wednesday the RBI's independence was "an essential and accepted governance requirement" but it added that it would continue to extensively consult with the central bank to give its assessments on issues and suggest possible solutions.

Government officials on Wednesday declined to say whether it had for the first time ever used, or threatened to use, powers under the RBI Act that allow it to give the bank instructions. The Economic Times newspaper reported the government had sent letters to Patel in recent weeks exercising those powers.

Mahajan said that the government had every right to use the powers of the RBI act.

The Reserve Bank of India governor should work in sync with the nation's government to support economic growth or he should resign, said the head of the economic wing of Rashtriya Swayamsevak Sangh.

The Reserve Bank of India governor should work in sync with the nation's government to support economic growth or he should resign, said the head of the economic wing of Rashtriya Swayamsevak Sangh. RBI Governor Urjit Patel should also "restrain his officials from making differences public," said the RSS official, Ashwani Mahajan, in an interview on Wednesday. "If he doesn't follow discipline it would be better for him to resign," he added. Mahajan is chief of the RSS's Swadeshi Jagran Manch (SJM) economic group. Earlier in the day, some local TV channels reported that Patel could consider resigning from his post given a breakdown in relations with the government, sparking a sell-off in the rupee and bonds. Tensions between the RBI and the government have become increasingly public after the bank's Deputy Governor Viral Acharya said last Friday night that undermining central bank independence could be "potentially catastrophic". His comments indicated that the RBI was pushing back against government pressure to relax its policies and reduce its powers ahead of a general election due by May. In a statement, the government said on Wednesday the RBI's independence was "an essential and accepted governance requirement" but it added that it would continue to extensively consult with the central bank to give its assessments on issues and suggest possible solutions. Government officials on Wednesday declined to say whether it had for the first time ever used, or threatened to use, powers under the RBI Act that allow it to give the bank instructions. The Economic Times newspaper reported the government had sent letters to Patel in recent weeks exercising those powers. Mahajan said that the government had every right to use the powers of the RBI act.

RBI head should work with government or quit, says RSS official 

Reserve Bank of India Governor Urjit Patel may consider resigning from his post given a <a href="http://www.wionews.com/india-news/government-very-upset-with-rbi-for-making-rift-public-sources-174359">breakdown in relations</a> with the government, TV channels reported on Wednesday, sparking a sell-off in the rupee and bonds.

Indian television channels CNBC-TV18 and ET Now cited sources as saying that Patel could quit.

The RBI and the finance ministry declined to comment.

Also read:&nbsp;<a href="http://www.wionews.com/india-news/government-invokes-never-used-before-powers-to-issue-directions-to-rbi-report-174517">Government invokes never-used-before powers to issue directions to RBI governor</a>

The government has invoked never-before-used powers under the RBI Act that allow it to issue directions to the central bank governor on matters of public interest, the Economic Times newspaper reported.

It said the government had sent letters to the RBI governor in recent weeks exercising powers under Section 7 of the RBI Act on issues ranging from liquidity for non-bank finance companies, capital requirements for weak banks and lending to small- and medium-sized companies.

Section 7 says that 'the Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest', a statute that has not been used in independent India, according to the Economic Times.

The 10-year benchmark bond yield rose to 7.87 per cent from its previous close of 7.83 per cent.

The rupee fell to 73.99 to the dollar from 73.6750 on Tuesday, after touching 74.04, its lowest since October 15.

"It is difficult to believe that the RBI governor will resign because it is unprecedented and would look quite irresponsible and (an) immature step," said a senior trader at a foreign bank. "But it is quite worrisome to see the government trying to continuously interfere into the RBI's operations."

IN THE OPEN

Tensions between the RBI and the government have spilled into the public domain after Deputy Governor Viral Acharya said last week that undermining central bank independence could be "potentially catastrophic", indicating the authority is pushing back against government pressure to relax its policies and reduce its powers ahead of a general election due by May.

Adding to the row, Finance Minister Arun Jaitley blamed the central bank for failing to stop a lending spree during 2008-2014 that left banks with $150 billion of bad debt.

Patel and other regulators, including the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority, met Jaitley and other top finance ministry officials at a meeting of the Financial Stability and Development Council on Tuesday to discuss the liquidity crunch.

However, there was no sign of resignation by Patel at the meeting, officials said.

Patel and his deputy governors are expected to meet top finance ministry officials on Friday.

Reserve Bank of India Governor Urjit Patel may consider resigning from his post given a breakdown in relations with the government, TV channels reported on Wednesday, sparking a sell-off in the rupee and bonds.

Reserve Bank of India Governor Urjit Patel may consider resigning from his post given a breakdown in relations with the government, TV channels reported on Wednesday, sparking a sell-off in the rupee and bonds. Indian television channels CNBC-TV18 and ET Now cited sources as saying that Patel could quit. The RBI and the finance ministry declined to comment. Also read: Government invokes never-used-before powers to issue directions to RBI governor The government has invoked never-before-used powers under the RBI Act that allow it to issue directions to the central bank governor on matters of public interest, the Economic Times newspaper reported. It said the government had sent letters to the RBI governor in recent weeks exercising powers under Section 7 of the RBI Act on issues ranging from liquidity for non-bank finance companies, capital requirements for weak banks and lending to small- and medium-sized companies. Section 7 says that 'the Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest', a statute that has not been used in independent India, according to the Economic Times. The 10-year benchmark bond yield rose to 7.87 per cent from its previous close of 7.83 per cent. The rupee fell to 73.99 to the dollar from 73.6750 on Tuesday, after touching 74.04, its lowest since October 15. "It is difficult to believe that the RBI governor will resign because it is unprecedented and would look quite irresponsible and (an) immature step," said a senior trader at a foreign bank. "But it is quite worrisome to see the government trying to continuously interfere into the RBI's operations." IN THE OPEN Tensions between the RBI and the government have spilled into the public domain after Deputy Governor Viral Acharya said last week that undermining central bank independence could be "potentially catastrophic", indicating the authority is pushing back against government pressure to relax its policies and reduce its powers ahead of a general election due by May. Adding to the row, Finance Minister Arun Jaitley blamed the central bank for failing to stop a lending spree during 2008-2014 that left banks with $150 billion of bad debt. Patel and other regulators, including the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority, met Jaitley and other top finance ministry officials at a meeting of the Financial Stability and Development Council on Tuesday to discuss the liquidity crunch. However, there was no sign of resignation by Patel at the meeting, officials said. Patel and his deputy governors are expected to meet top finance ministry officials on Friday.

RBI Governor Urjit Patel may consider resigning after rift with government: Report

Asserting that the Indian economy turned in a resilient performance in 2017-18, Reserve Bank of India (RBI) Governor Urjit Patel has said the country's growth is expected to accelerate next fiscal.

Mr Patel was addressing the International Monetary Finance Committee here yesterday.

"The Indian economy turned in a resilient performance in 2017-18," Mr Patel said.

Although the real GDP growth was moderated to 6.6 per cent from 7.1 per cent a year ago, there was a strong rebound in the second half of the year on the back of a turnaround in investment demand, he said.

This was supported by an acceleration in manufacturing, rising sales growth, a pick-up in capacity utilisation, strong activity in the services sector and a record agricultural harvest, the RBI governor added.

"Several factors are expected to help accelerate the pace of growth in 2018-19. There are now clearer signs that the revival in investment activity will be sustained," he said.

Global demand has been improving, which should encourage exports and boost fresh investments, Patel said, adding that on the whole, real GDP growth was expected to expand at 7.4 per cent in 2018-19, with risks evenly balanced.

In his address, Mr Patel said since November 2016, headline consumer price inflation had generally remained below the medium-term target of four per cent.

An unusual spike in vegetables prices pushed up inflation to a recent peak of 5.2 per cent in December, but it eased in subsequent months to reach 4.3 per cent in March, he said.

Mr Patel said several factors were likely to influence the inflation outlook, including a possible moderation in food prices if the monsoon turned out to be normal and was supported by an effective food supply management.

"Countervailing this, upside risks emanate from the distinct hardening bias in crude oil prices, the steady firming up of inflation excluding food and fuel mirroring pick up in domestic demand, and spillovers from financial volatility as markets re-price the path of monetary policy normalisation by systemic central banks," he said.

Noting that risks to inflation are tilted to the upside, the monetary policy rate was kept unchanged at 6.0 per cent in April 2018 with a neutral stance, Mr Patel said.

Asserting that the government is committed to fiscal prudence, the RBI governor said aided by buoyancy in tax revenues and rationalisation of subsidies, the gross fiscal deficit (GFD) of the central government has been steadily brought down since 2013-14 to 3.5 per cent of GDP in 2017-18 without compromising on public investment requirements and social sector spending.

The GFD is budgeted lower at 3.3 per cent in 2018-19, he said. The government has accepted a debt rule that will bring down the debt-to-GDP ratio to 40 per cent over a period of time by 2024-25.

Mr Patel said the goods and services tax (GST), which was implemented from July 2017 has reformed the system of indirect taxes by simplifying payments and credits, and improving the efficiency of movement of goods across the country.

Automation of tax payments and 'team-based assessment with dynamic jurisdiction' without direct interface with tax payers has improved overall efficiency and transparency of revenue administration, he said.

Mr Patel said with the pace of import growth relative to that of exports, the current account deficit (CAD) expanded from 0.7 per cent in 2016-17 to 1.9 per cent for the first nine months of 2017-18.

External financing conditions remained comfortable, boosted mainly by robust inflows of foreign direct investment (FDI), he said.

The UNCTAD's survey of multinational enterprises ranked India as the third most favoured destination for FDI for 2017-19. Reflecting these developments, India's foreign exchange reserves at $424 billion were equivalent of 11 months of imports, he added. 
"India has persevered with structural reforms over a wide area ranging from a flexible inflation targeting framework for monetary policy liberalisation of FDI flows a unique identification (Aadhaar) backed direct benefit transfers an insolvency and bankruptcy code the GST realty reforms and a swathe of measures for improvement in the ease of doing business more generally," he said.

These factors have improved India's global ranking in the World Bank's Ease of Doing Business, Mr Patel added.

'Several factors are expected to help accelerate the pace of growth in 2018-19. There are now clearer signs that the revival in investment activity will be sustained,' he said

Asserting that the Indian economy turned in a resilient performance in 2017-18, Reserve Bank of India (RBI) Governor Urjit Patel has said the country's growth is expected to accelerate next fiscal. Mr Patel was addressing the International Monetary Finance Committee here yesterday. "The Indian economy turned in a resilient performance in 2017-18," Mr Patel said. Although the real GDP growth was moderated to 6.6 per cent from 7.1 per cent a year ago, there was a strong rebound in the second half of the year on the back of a turnaround in investment demand, he said. This was supported by an acceleration in manufacturing, rising sales growth, a pick-up in capacity utilisation, strong activity in the services sector and a record agricultural harvest, the RBI governor added. "Several factors are expected to help accelerate the pace of growth in 2018-19. There are now clearer signs that the revival in investment activity will be sustained," he said. Global demand has been improving, which should encourage exports and boost fresh investments, Patel said, adding that on the whole, real GDP growth was expected to expand at 7.4 per cent in 2018-19, with risks evenly balanced. In his address, Mr Patel said since November 2016, headline consumer price inflation had generally remained below the medium-term target of four per cent. An unusual spike in vegetables prices pushed up inflation to a recent peak of 5.2 per cent in December, but it eased in subsequent months to reach 4.3 per cent in March, he said. Mr Patel said several factors were likely to influence the inflation outlook, including a possible moderation in food prices if the monsoon turned out to be normal and was supported by an effective food supply management. "Countervailing this, upside risks emanate from the distinct hardening bias in crude oil prices, the steady firming up of inflation excluding food and fuel mirroring pick up in domestic demand, and spillovers from financial volatility as markets re-price the path of monetary policy normalisation by systemic central banks," he said. Noting that risks to inflation are tilted to the upside, the monetary policy rate was kept unchanged at 6.0 per cent in April 2018 with a neutral stance, Mr Patel said. Asserting that the government is committed to fiscal prudence, the RBI governor said aided by buoyancy in tax revenues and rationalisation of subsidies, the gross fiscal deficit (GFD) of the central government has been steadily brought down since 2013-14 to 3.5 per cent of GDP in 2017-18 without compromising on public investment requirements and social sector spending. The GFD is budgeted lower at 3.3 per cent in 2018-19, he said. The government has accepted a debt rule that will bring down the debt-to-GDP ratio to 40 per cent over a period of time by 2024-25. Mr Patel said the goods and services tax (GST), which was implemented from July 2017 has reformed the system of indirect taxes by simplifying payments and credits, and improving the efficiency of movement of goods across the country. Automation of tax payments and 'team-based assessment with dynamic jurisdiction' without direct interface with tax payers has improved overall efficiency and transparency of revenue administration, he said. Mr Patel said with the pace of import growth relative to that of exports, the current account deficit (CAD) expanded from 0.7 per cent in 2016-17 to 1.9 per cent for the first nine months of 2017-18. External financing conditions remained comfortable, boosted mainly by robust inflows of foreign direct investment (FDI), he said. The UNCTAD's survey of multinational enterprises ranked India as the third most favoured destination for FDI for 2017-19. Reflecting these developments, India's foreign exchange reserves at $424 billion were equivalent of 11 months of imports, he added. "India has persevered with structural reforms over a wide area ranging from a flexible inflation targeting framework for monetary policy liberalisation of FDI flows a unique identification (Aadhaar) backed direct benefit transfers an insolvency and bankruptcy code the GST realty reforms and a swathe of measures for improvement in the ease of doing business more generally," he said. These factors have improved India's global ranking in the World Bank's Ease of Doing Business, Mr Patel added.

India's pace of growth to accelerate in 2018-19: RBI governor

The Reserve Bank of India chief said on Wednesday that it had &quot;very limited authority&quot; over state-run banks and called for reforms in the wake of a $2 billion fraud to give the regulator the same powers to police state-run banks as it has over private lenders.

Reserve Bank of India (RBI) Governor Urjit Patel defended the central bank`s role in the aftermath of the Punjab National Bank (PNB) fraud case and launched an indirect broadside against the Indian government, which has been critical of the role of the regulator and auditors in failing to spot the huge alleged scam.

In a speech at a law university in the Western Indian state of Gujarat, Patel said there were numerous limitations in the RBI`s powers over state-run lenders, such as its inability to remove directors, replace management, push through a merger or initiate liquidation.

While the RBI regulates all banks in India, state-run banks are also regulated by the government, which owns majority-stakes in them.

This has, in effect, led to a system of &quot;dual regulation&quot;, said Patel, adding that this &quot;fault line is bound to lead to tremors such as the most recent fraud&quot;.

The unravelling PNB fraud, the biggest in Indian banking history, has stunned the financial sector and pushed the RBI and government to crack down on bank systems and lending practices.

In a speech at a law university in the Western Indian state of Gujarat, Patel said there were numerous limitations in the RBI`s powers over state-run lenders

The Reserve Bank of India chief said on Wednesday that it had "very limited authority" over state-run banks and called for reforms in the wake of a $2 billion fraud to give the regulator the same powers to police state-run banks as it has over private lenders. Reserve Bank of India (RBI) Governor Urjit Patel defended the central bank`s role in the aftermath of the Punjab National Bank (PNB) fraud case and launched an indirect broadside against the Indian government, which has been critical of the role of the regulator and auditors in failing to spot the huge alleged scam. In a speech at a law university in the Western Indian state of Gujarat, Patel said there were numerous limitations in the RBI`s powers over state-run lenders, such as its inability to remove directors, replace management, push through a merger or initiate liquidation. While the RBI regulates all banks in India, state-run banks are also regulated by the government, which owns majority-stakes in them. This has, in effect, led to a system of "dual regulation", said Patel, adding that this "fault line is bound to lead to tremors such as the most recent fraud". The unravelling PNB fraud, the biggest in Indian banking history, has stunned the financial sector and pushed the RBI and government to crack down on bank systems and lending practices.

RBI Governor Urjit Patel calls for more power over state-run banks in wake of PNB fraud

The Reserve Bank is likely to keep the key rate unchanged on Wednesday and stay focused on inflation control as the rebound in September quarter GDP growth - after a five quarter decline - seemed to have eased pressure on it to lower rates, experts said.

India Inc, however, is demanding interest rate cut to further build on positive sentiment generated by the rebound and upgrade of the country&#39;s sovereign rating by Moody&#39;s.

The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, will meet on December 5 and 6 for the Fifth Bi-monthly Monetary Policy Statement for 2017-18. The resolution of the MPC will be made public on December 6.

In its October review, it had kept the benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7 per cent for the current fiscal.

The central bank had reduced the benchmark lending rate by 0.25 percentage points to 6 per cent in August, bringing it to a 6-year low.

Bankers and experts are of the view that the RBI for the second time in a row may key repo-rate or short-term lending rate unchanged as inflation trajectory is likely to remain upward in the coming months.

&quot;It&#39;s going to be a status quo. The liquidity in the system is very low, deposit rates are firming up and there are concerns about inflation,&quot; said Union Bank MD and CEO Rajkiran Rai G.

Global financial services major Nomura said while lower GST rates have moderated output prices, input cost pressures are marginally higher, which along with higher food inflation is likely to push retail inflation slightly above the RBI midpoint target of 4 per cent in November and beyond.

&quot;We expect a hawkish hold from the RBI..And policy rates to remain unchanged through 2018,&quot; it said in a report.

Wholesale prices-based inflation had shot up to a 6-month high of 3.59 per cent in October. The retail inflation (Consumer Price Index) for October rose to a 7-month high of 3.58 per cent.

Meanwhile, industry body Ficci said there has been positive news in the form of improvement in ease of doing business rankings, Moody?s upgrade of India&#39;s rating and the massive recapitalisation plan for banks.

&quot;This is a good opportunity to further build the confidence levels. The monetary policy announcement next week will be a perfect timing to give another shot to boost the sentiment,&quot; said Ficci President Pankaj Patel in a statement.

Reversing a five-quarter slide in GDP growth, Indian economy bounced back from a three-year low to expand by 6.3 per cent in the July-September period as manufacturing revved up and businesses adjusted to the new GST tax regime.

The GDP growth in the second quarter of 2017-18 compares to 5.7 per cent in April-June.

Credit rating firm ICRA has said RBI is likely to keep the key policy rate unchanged at 6 per cent as it expects retail inflation to firm up in the coming months.

It said the (MPC) would leave the repo rate unchanged at 6 per cent &quot;in a non-unanimous decision in the December 2017 policy review, given the expectation of a further rise in the CPI inflation in the coming months&quot;.

With gross value added (GVA) growth estimated by the Central Statistics Office at 5.8 per cent in first half of FY&#39;18, a downward bias is likely to be placed on the MPC&#39;s baseline forecast for growth of GVA at basic prices of 6.7 per cent for ongoing fiscal.&nbsp;

The Monetary Policy Committee headed by RBI Governor Urjit Patel will meet on December 5 and 6 for the Fifth Bi-monthly Monetary Policy Statement for 2017-18

The Reserve Bank is likely to keep the key rate unchanged on Wednesday and stay focused on inflation control as the rebound in September quarter GDP growth - after a five quarter decline - seemed to have eased pressure on it to lower rates, experts said. India Inc, however, is demanding interest rate cut to further build on positive sentiment generated by the rebound and upgrade of the country's sovereign rating by Moody's. The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, will meet on December 5 and 6 for the Fifth Bi-monthly Monetary Policy Statement for 2017-18. The resolution of the MPC will be made public on December 6. In its October review, it had kept the benchmark interest rate unchanged on fears of rising inflation while lowering growth forecast to 6.7 per cent for the current fiscal. The central bank had reduced the benchmark lending rate by 0.25 percentage points to 6 per cent in August, bringing it to a 6-year low. Bankers and experts are of the view that the RBI for the second time in a row may key repo-rate or short-term lending rate unchanged as inflation trajectory is likely to remain upward in the coming months. "It's going to be a status quo. The liquidity in the system is very low, deposit rates are firming up and there are concerns about inflation," said Union Bank MD and CEO Rajkiran Rai G. Global financial services major Nomura said while lower GST rates have moderated output prices, input cost pressures are marginally higher, which along with higher food inflation is likely to push retail inflation slightly above the RBI midpoint target of 4 per cent in November and beyond. "We expect a hawkish hold from the RBI..And policy rates to remain unchanged through 2018," it said in a report. Wholesale prices-based inflation had shot up to a 6-month high of 3.59 per cent in October. The retail inflation (Consumer Price Index) for October rose to a 7-month high of 3.58 per cent. Meanwhile, industry body Ficci said there has been positive news in the form of improvement in ease of doing business rankings, Moody?s upgrade of India's rating and the massive recapitalisation plan for banks. "This is a good opportunity to further build the confidence levels. The monetary policy announcement next week will be a perfect timing to give another shot to boost the sentiment," said Ficci President Pankaj Patel in a statement. Reversing a five-quarter slide in GDP growth, Indian economy bounced back from a three-year low to expand by 6.3 per cent in the July-September period as manufacturing revved up and businesses adjusted to the new GST tax regime. The GDP growth in the second quarter of 2017-18 compares to 5.7 per cent in April-June. Credit rating firm ICRA has said RBI is likely to keep the key policy rate unchanged at 6 per cent as it expects retail inflation to firm up in the coming months. It said the (MPC) would leave the repo rate unchanged at 6 per cent "in a non-unanimous decision in the December 2017 policy review, given the expectation of a further rise in the CPI inflation in the coming months". With gross value added (GVA) growth estimated by the Central Statistics Office at 5.8 per cent in first half of FY'18, a downward bias is likely to be placed on the MPC's baseline forecast for growth of GVA at basic prices of 6.7 per cent for ongoing fiscal.

RBI likely to keep interest rate on hold for second time in row

The Reserve Bank of India (RBI) on Friday announced circulation of new currency denomination of Rs. 50 banknotes in the Mahatma Gandhi (New) Series.

Bearing signature of RBI Governor Urjit Patel, the new denomination has motif of Hampi with Chariot on the reverse, depicting the country`s cultural heritage.

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<a href="https://twitter.com/hashtag/FLASH?src=hash">#FLASH</a> RBI to shortly issue 50 denomination banknotes with motif of Hampi with Chariot on reverse, depicting country&rsquo;s cultural heritage <a href="https://t.co/Ao4MnMMNUG">pic.twitter.com/Ao4MnMMNUG</a>
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With base colour in fluorescent blue, the note has other designs, geometric patterns aligning with the overall colour scheme, both at the obverse and reverse.

All the banknotes in the denomination of Rs. 50 issued by the RBI in the earlier series will continue to be legal tender.

Last year in December, the central bank had announced issue of Rs. 50 denomination banknotes in the Mahatma Gandhi Series-2005, without inset letter in both the number panels, bearing signature of Patel and the year of printing `2016` printed on the reverse of the banknote.

It added that the design and security features of the new notes will be similar to the old tender, which will continue in circulation.&nbsp;

The new note has a picture of Gandhi on the front and Hampi on the back

The Reserve Bank of India (RBI) on Friday announced circulation of new currency denomination of Rs. 50 banknotes in the Mahatma Gandhi (New) Series. Bearing signature of RBI Governor Urjit Patel, the new denomination has motif of Hampi with Chariot on the reverse, depicting the country`s cultural heritage. #FLASH RBI to shortly issue 50 denomination banknotes with motif of Hampi with Chariot on reverse, depicting country’s cultural heritage pic.twitter.com/Ao4MnMMNUG — ANI (@ANI) August 18, 2017 × With base colour in fluorescent blue, the note has other designs, geometric patterns aligning with the overall colour scheme, both at the obverse and reverse. All the banknotes in the denomination of Rs. 50 issued by the RBI in the earlier series will continue to be legal tender. Last year in December, the central bank had announced issue of Rs. 50 denomination banknotes in the Mahatma Gandhi Series-2005, without inset letter in both the number panels, bearing signature of Patel and the year of printing `2016` printed on the reverse of the banknote. It added that the design and security features of the new notes will be similar to the old tender, which will continue in circulation.

RBI introduces new Rs 50 note

Under Governor Urjit Patel, the Reserve Bank of India (RBI) will target inflation of 4 percent, three officials familiar with its thinking said, adopting a narrower reading of its mandate than markets in a bid to stamp out rampant price rises of the past.

The differing interpretations of amendments to last year&#39;s RBI Act reflect sometimes strained relations between the market and the central bank, and are proving a test for Patel some eight months into his tenure.

The amendments were part of landmark changes to India&#39;s monetary policy pushed by Patel, then deputy governor, and his predecessor as governor, Raghuram Rajan, and require the RBI &quot;to contain inflation within the specified target level&quot; of 4 percent, but within a tolerated band of 2-6 percent.

Markets have interpreted that as the range of 2-6 percent, arguing that pursuing a specific 4 percent target takes away the flexibility needed in an economy that must grow by at least 8 percent a year to allow for full employment.

But the RBI is determined to chase the 4 percent figure, the officials said, as Patel and the other five members of his monetary policy committee (MPC) seek to defend the RBI&#39;s credibility on inflation.

&quot;Markets should read the Act carefully and think as if they are a member of the MPC, and then think: how would they conduct policy?&quot; said one of the officials.

&quot;The Act clearly says 4 percent is the target and the 2-6 percent band has been given only to absorb temporary or one-time shocks.&quot;

All three officials spoke on condition of anonymity, because they were not authorised to speak to the press on sensitive policy issues.

The RBI did not give official comment.

Such a stance could open the prospect of earlier interest rate hikes than expected by markets, should prices start to move higher unexpectedly and remain there for some time.

The officials stressed, however, that the RBI was also mindful of growth, in line with an Act that tasks the MPC with &quot;maintaining price stability, while keeping in mind the objective of growth.&quot;

Consumer inflation stood at 3.81 percent in March, but weaker-than-expected monsoon rains and planned hikes to government employee salaries could easily see the 4 percent target under threat.

But any move to hike the repo rate of 6.25 percent would need to be balanced by concerns among market participants that the economy is weaker than the 7.0 percent growth in the October-December quarter, as India&#39;s move last year to ban higher-valued bank notes continues to reverberate.

&quot;So far as the 4 percent target goes, the MPC has to decide how to go ahead in a calibrated way, balancing out the costs associated with that stance,&quot; said the second of the three officials.

RBI VERSUS MARKETS

The pursuit of the 4 percent target will likely continue to remain a source of disagreement between the RBI and some market players, even as investors begin to adjust to a more hawkish monetary policy.

A Reuters poll last month showed only seven out of 38 economists expected a rate cut this year, down from 21 out of 36 earlier.

However, Indranil Sengupta, economist and co-head of India Research at Bank of America Merrill Lynch, said inflation was &quot;a long, long way&quot; from becoming an issue since the economy has yet to accelerate meaningfully.

&quot;In our opinion there is a case for a 25 bps rate cut in August,&quot; he said.

The differing views reflect how markets are still adjusting to the changes to the monetary policy framework over the past two years in a country with a history of volatile and double-digit inflation.

Patel started his tenure by cutting rates in October, priming investors to believe he would soften his focus on inflation, only to then stun investors by changing the monetary policy stance to &quot;neutral&quot; from &quot;accommodative&quot; in February and adopting a much more hawkish tone.

Since then, the 10-year benchmark government bond yield has risen about 50 basis points.

The officials defended the actions as consistent with the RBI&#39;s views on the trajectory of inflation, which hit as low as 3.17 percent in January.

But it has since accelerated, and becoming too tolerant could dent the bank&#39;s credibility, the officials argued.

&quot;If people start doubting RBI&#39;s credibility in controlling inflation, then producers will start raising prices, which in turn will push up inflation expectations. It is very important to keep inflation expectations well anchored,&quot; said the second official.&nbsp;

(Reuters)

The stance could open the prospect of earlier interest rate hikes than expected by markets

Under Governor Urjit Patel, the Reserve Bank of India (RBI) will target inflation of 4 percent, three officials familiar with its thinking said, adopting a narrower reading of its mandate than markets in a bid to stamp out rampant price rises of the past. The differing interpretations of amendments to last year's RBI Act reflect sometimes strained relations between the market and the central bank, and are proving a test for Patel some eight months into his tenure. The amendments were part of landmark changes to India's monetary policy pushed by Patel, then deputy governor, and his predecessor as governor, Raghuram Rajan, and require the RBI "to contain inflation within the specified target level" of 4 percent, but within a tolerated band of 2-6 percent. Markets have interpreted that as the range of 2-6 percent, arguing that pursuing a specific 4 percent target takes away the flexibility needed in an economy that must grow by at least 8 percent a year to allow for full employment. But the RBI is determined to chase the 4 percent figure, the officials said, as Patel and the other five members of his monetary policy committee (MPC) seek to defend the RBI's credibility on inflation. "Markets should read the Act carefully and think as if they are a member of the MPC, and then think: how would they conduct policy?" said one of the officials. "The Act clearly says 4 percent is the target and the 2-6 percent band has been given only to absorb temporary or one-time shocks." All three officials spoke on condition of anonymity, because they were not authorised to speak to the press on sensitive policy issues. The RBI did not give official comment. Such a stance could open the prospect of earlier interest rate hikes than expected by markets, should prices start to move higher unexpectedly and remain there for some time. The officials stressed, however, that the RBI was also mindful of growth, in line with an Act that tasks the MPC with "maintaining price stability, while keeping in mind the objective of growth." Consumer inflation stood at 3.81 percent in March, but weaker-than-expected monsoon rains and planned hikes to government employee salaries could easily see the 4 percent target under threat. But any move to hike the repo rate of 6.25 percent would need to be balanced by concerns among market participants that the economy is weaker than the 7.0 percent growth in the October-December quarter, as India's move last year to ban higher-valued bank notes continues to reverberate. "So far as the 4 percent target goes, the MPC has to decide how to go ahead in a calibrated way, balancing out the costs associated with that stance," said the second of the three officials. RBI VERSUS MARKETS The pursuit of the 4 percent target will likely continue to remain a source of disagreement between the RBI and some market players, even as investors begin to adjust to a more hawkish monetary policy. A Reuters poll last month showed only seven out of 38 economists expected a rate cut this year, down from 21 out of 36 earlier. However, Indranil Sengupta, economist and co-head of India Research at Bank of America Merrill Lynch, said inflation was "a long, long way" from becoming an issue since the economy has yet to accelerate meaningfully. "In our opinion there is a case for a 25 bps rate cut in August," he said. The differing views reflect how markets are still adjusting to the changes to the monetary policy framework over the past two years in a country with a history of volatile and double-digit inflation. Patel started his tenure by cutting rates in October, priming investors to believe he would soften his focus on inflation, only to then stun investors by changing the monetary policy stance to "neutral" from "accommodative" in February and adopting a much more hawkish tone. Since then, the 10-year benchmark government bond yield has risen about 50 basis points. The officials defended the actions as consistent with the RBI's views on the trajectory of inflation, which hit as low as 3.17 percent in January. But it has since accelerated, and becoming too tolerant could dent the bank's credibility, the officials argued. "If people start doubting RBI's credibility in controlling inflation, then producers will start raising prices, which in turn will push up inflation expectations. It is very important to keep inflation expectations well anchored," said the second official. (Reuters)

RBI to target 4 per cent inflation

Cautioning against protectionism, RBI Governor Urjit Patel has said where would giant American corporations like Apple, Cisco and IBM be if they had not sourced the best products and talent from across the world.

&quot;I don&#39;t think that we have heard the last word on US policy talk about this because there is a push back internationally that the world has benefited from an open trading system,&quot; the Reserve Bank of India (RBI) governor said after delivering a lecture in New York.

He made the remarks in response to a question on the rise of protectionist tendencies in major world economies after he delivered the Third Kotak Family Distinguished Lecture, sponsored by the Raj Center on Indian Economic Policies at the Columbia University&#39;s School of International and Public Affairs.

He said the share prices of the most efficient corporations in the world, including in the US, are where they are because of the global supply chains.

&quot;Where would Apple be, where would Cisco be, where would IBM be if they were not sourcing the best products and talent from across the world. And if policies come in the way of that, then the big wealth creators in a country that advocates protectionism are ultimately affected,&quot; he said yesterday.

Patel said the calls for protectionism in the US&nbsp;were on account of equity and domestic distribution issues which &quot;textbook economics tells us should be addressed through domestic fiscal policy&quot; such as taxation and income transfers.

He noted that using trade instruments for protectionism may take a nation on a trajectory different from that of growth.

&quot;Using trade instruments like customs duties, border tax etc is not the most efficient way to do this. In fact, you could end up at somewhere else. You do not know what are the implications of some of these policies on equity and distribution besides objectives that you want to address,&quot; he said.

&quot;It should be a domestic policy issue, using domestic fiscal policy if those are the objectives that need to be addressed,&quot; Patel said.

(PTI)

Patel made the remarks in response to a question on the rise of protectionist tendencies in major world economies

Cautioning against protectionism, RBI Governor Urjit Patel has said where would giant American corporations like Apple, Cisco and IBM be if they had not sourced the best products and talent from across the world. "I don't think that we have heard the last word on US policy talk about this because there is a push back internationally that the world has benefited from an open trading system," the Reserve Bank of India (RBI) governor said after delivering a lecture in New York. He made the remarks in response to a question on the rise of protectionist tendencies in major world economies after he delivered the Third Kotak Family Distinguished Lecture, sponsored by the Raj Center on Indian Economic Policies at the Columbia University's School of International and Public Affairs. He said the share prices of the most efficient corporations in the world, including in the US, are where they are because of the global supply chains. "Where would Apple be, where would Cisco be, where would IBM be if they were not sourcing the best products and talent from across the world. And if policies come in the way of that, then the big wealth creators in a country that advocates protectionism are ultimately affected," he said yesterday. Patel said the calls for protectionism in the US were on account of equity and domestic distribution issues which "textbook economics tells us should be addressed through domestic fiscal policy" such as taxation and income transfers. He noted that using trade instruments for protectionism may take a nation on a trajectory different from that of growth. "Using trade instruments like customs duties, border tax etc is not the most efficient way to do this. In fact, you could end up at somewhere else. You do not know what are the implications of some of these policies on equity and distribution besides objectives that you want to address," he said. "It should be a domestic policy issue, using domestic fiscal policy if those are the objectives that need to be addressed," Patel said. (PTI)

Where would Apple, IBM be if not for talent from across globe: RBI chief Urjit Patel

RBI Governor Urjit Patel today attributed the banks grappling with high bad loans to legacy issues saying they are mostly on account of credit facility provided for long-gestation projects before 2011-12.

He further said the problem of non-performing assets (NPAs) was earlier also but it is only recently that the issue is being recognised.

Patel said that sectors in which bad loans have emerged over the years pertain to long-gestation projects, which were mostly funded before 2011-12.

&quot;Therefore, ...By definition, this proportionate amount is a legacy issue, although the recognition and reporting of these have taken place only recently,&quot; the RBI Governor said.

Finance Minister Arun Jaitley after addressing the RBI board said a legal and executive framework to deal with NPAs has been put in place by the government as its resolution is an ongoing process.

Jaitley also said the bad loans figure has increased owing to emergence of some new NPAs or loans that have been continuing. Congress leader Veerappa Moily had recently raised the bad loans issue in Parliament and said the NPAs figure has grown since 2014.

&quot;I was in Parliament responding to a comment which Moily had made. What was figure in 2014, then 2015, 16, 17 it increased. So I had said these are all loans which have been continuing and what&#39;s have been added is either the discovery of some non-performing assets as a result of some exercise that RBI had directed to be undertaken and also the interest factor has increased,&quot; Jaitley said.

After the Asset Quality Review (AQR), there was huge surge in NPA. In the third quarter of the last fiscal alone, NPAs rose over Rs 1-lakh crore.

&quot;Now resolution of these is an ongoing process...Now for individual bankers to get into exercise of resolving each one of the pending issues,&quot; he said.

On when the RBI will be able to come out with the figures of scrapped notes which have been deposited with the banks, the Governor said the number that should divulge should be a verified number and a number that is congruent with the complex accounting.

&quot;Given that the window is open until March 31 and then at a lower level until June 30 we need to be careful and try as hard as possible that this is a number that is not a mere estimate but a verifiable number both physically and in accounting stance,&quot; he said.

Following the shock demonetisation announcement on November 8, the government had asked people to deposit old notes in banks by December 30.

Indians who were abroad during November 9 to December 30 have been given a 3-month grace period till March 31 to deposit the junked notes, while for the NRIs, it is 6 months till June 30.

Earlier this week, RBI Deputy Governor S S Mundra said the final numbers can only be revealed after counting the notes deposited in cooperative banks, receipt of information from Nepal and Bhutan and close of the window for deposit of notes by NRIs.

(PTI)

Patel said that sectors in which bad loans have emerged over the years pertain to long-gestation projects

RBI Governor Urjit Patel today attributed the banks grappling with high bad loans to legacy issues saying they are mostly on account of credit facility provided for long-gestation projects before 2011-12. He further said the problem of non-performing assets (NPAs) was earlier also but it is only recently that the issue is being recognised. Patel said that sectors in which bad loans have emerged over the years pertain to long-gestation projects, which were mostly funded before 2011-12. "Therefore, ...By definition, this proportionate amount is a legacy issue, although the recognition and reporting of these have taken place only recently," the RBI Governor said. Finance Minister Arun Jaitley after addressing the RBI board said a legal and executive framework to deal with NPAs has been put in place by the government as its resolution is an ongoing process. Jaitley also said the bad loans figure has increased owing to emergence of some new NPAs or loans that have been continuing. Congress leader Veerappa Moily had recently raised the bad loans issue in Parliament and said the NPAs figure has grown since 2014. "I was in Parliament responding to a comment which Moily had made. What was figure in 2014, then 2015, 16, 17 it increased. So I had said these are all loans which have been continuing and what's have been added is either the discovery of some non-performing assets as a result of some exercise that RBI had directed to be undertaken and also the interest factor has increased," Jaitley said. After the Asset Quality Review (AQR), there was huge surge in NPA. In the third quarter of the last fiscal alone, NPAs rose over Rs 1-lakh crore. "Now resolution of these is an ongoing process...Now for individual bankers to get into exercise of resolving each one of the pending issues," he said. On when the RBI will be able to come out with the figures of scrapped notes which have been deposited with the banks, the Governor said the number that should divulge should be a verified number and a number that is congruent with the complex accounting. "Given that the window is open until March 31 and then at a lower level until June 30 we need to be careful and try as hard as possible that this is a number that is not a mere estimate but a verifiable number both physically and in accounting stance," he said. Following the shock demonetisation announcement on November 8, the government had asked people to deposit old notes in banks by December 30. Indians who were abroad during November 9 to December 30 have been given a 3-month grace period till March 31 to deposit the junked notes, while for the NRIs, it is 6 months till June 30. Earlier this week, RBI Deputy Governor S S Mundra said the final numbers can only be revealed after counting the notes deposited in cooperative banks, receipt of information from Nepal and Bhutan and close of the window for deposit of notes by NRIs. (PTI)

Non-performing assets a legacy issue, RBI governor says

India pushed ahead with its decision to scrap banknotes even as the Reserve Bank of India&#39;s (RBI) own board expressed concern whether the cash could be replaced quickly enough, the central bank has said in written testimony to parliament.

The revelation comes amid growing criticism about whether the central bank and the government had sufficiently assessed the potential fallout from the November 8 ban of about 86 per cent of the cash then in circulation.

Prime Minister Narendra Modi&#39;s shock move caused a severe cash shortage that brought large parts of the economy to a virtual standstill, as the central bank struggled to print new 500-rupee and 2,000-rupee notes to replace the old currency.

A copy of the private testimony to a parliament panel, seen by Reuters, showed the central bank had also warned the government of &quot;possible inconvenience to the public for some time,&quot; among the potential consequences of the massive exercise.

Despite its own doubts, the testimony showed, the RBI board approved the plan to ban 500-rupee and 1,000-rupee notes, as it believed the move would rein in counterfeiting and reliance on cash, and pull unaccounted cash into the financial system.

&quot;It might not immediately be possible to replace these notes fully in terms of both value and volume,&quot; the board felt at a meeting ahead of Modi&#39;s November 8 announcement, according to the central bank submission.

But the RBI&#39;s board ultimately believed that &quot;corrective&quot; action could be taken and decided to recommend the move, the document showed. The RBI also believed the impact of such an exercise would be &quot;transitory&quot;, given its efforts to quickly replace the old notes, it said in the testimony.

The RBI&#39;s endorsement of the government action has drawn strong criticism from several former policymakers, including former Prime Minister Manmohan Singh, the architect of India&#39;s 1991 financial reforms and a former central bank governor.

The document also notes the proposal to ban the cash had come from the government, in a letter a day before the announcement that advised the RBI to &quot;immediately&quot; put the plan before its board for approval.

Under India&#39;s RBI Act, such a move was necessary.

The central bank did not immediately respond to Reuters` request for comments on its submission to parliament.

&quot;Painful&quot; for RBI

Since Modi declared the ban, the central bank has been forced to announce a barrage of measures to soften the impact, including several high-profile reversals, undermining confidence in it.

In a letter to RBI Governor Urjit Patel, unions of central bank employees called such criticism &quot;painful&quot;, and accused the government of steering decisions behind the replacement of the banned notes, saying that &quot;blatantly encroaches&quot; on the central bank&#39;s jurisdiction.

The government, however, has denied it was taking the decisions during the implementation, saying that it was merely cooperating with the RBI and reiterating that it fully respected the autonomy of the central bank.

Power and Coal Minister Piyush Goyal said such cooperation was necessary, since it involved an unprecedented &quot;exercise&quot; and that the flurry of action showed India`s flexibility in taking the necessary measures.&nbsp;

&quot;They never had got an experience of this kind of a war-type situation,&quot; Goyal said, referring to the RBI. &quot;So, every organization which is doing this is doing it for the first time. You will learn as you go along.&quot;

Previous banknote bans have not had such a dramatic impact as they removed only a small fraction of cash from circulation.&nbsp;

(Reuters) 
&nbsp;

The RBI clarified that it ultimately believed that 'corrective' action could be taken and decided to recommend the move

India pushed ahead with its decision to scrap banknotes even as the Reserve Bank of India's (RBI) own board expressed concern whether the cash could be replaced quickly enough, the central bank has said in written testimony to parliament. The revelation comes amid growing criticism about whether the central bank and the government had sufficiently assessed the potential fallout from the November 8 ban of about 86 per cent of the cash then in circulation. Prime Minister Narendra Modi's shock move caused a severe cash shortage that brought large parts of the economy to a virtual standstill, as the central bank struggled to print new 500-rupee and 2,000-rupee notes to replace the old currency. A copy of the private testimony to a parliament panel, seen by Reuters, showed the central bank had also warned the government of "possible inconvenience to the public for some time," among the potential consequences of the massive exercise. Despite its own doubts, the testimony showed, the RBI board approved the plan to ban 500-rupee and 1,000-rupee notes, as it believed the move would rein in counterfeiting and reliance on cash, and pull unaccounted cash into the financial system. "It might not immediately be possible to replace these notes fully in terms of both value and volume," the board felt at a meeting ahead of Modi's November 8 announcement, according to the central bank submission. But the RBI's board ultimately believed that "corrective" action could be taken and decided to recommend the move, the document showed. The RBI also believed the impact of such an exercise would be "transitory", given its efforts to quickly replace the old notes, it said in the testimony. The RBI's endorsement of the government action has drawn strong criticism from several former policymakers, including former Prime Minister Manmohan Singh, the architect of India's 1991 financial reforms and a former central bank governor. The document also notes the proposal to ban the cash had come from the government, in a letter a day before the announcement that advised the RBI to "immediately" put the plan before its board for approval. Under India's RBI Act, such a move was necessary. The central bank did not immediately respond to Reuters` request for comments on its submission to parliament. "Painful" for RBI Since Modi declared the ban, the central bank has been forced to announce a barrage of measures to soften the impact, including several high-profile reversals, undermining confidence in it. In a letter to RBI Governor Urjit Patel, unions of central bank employees called such criticism "painful", and accused the government of steering decisions behind the replacement of the banned notes, saying that "blatantly encroaches" on the central bank's jurisdiction. The government, however, has denied it was taking the decisions during the implementation, saying that it was merely cooperating with the RBI and reiterating that it fully respected the autonomy of the central bank. Power and Coal Minister Piyush Goyal said such cooperation was necessary, since it involved an unprecedented "exercise" and that the flurry of action showed India`s flexibility in taking the necessary measures. "They never had got an experience of this kind of a war-type situation," Goyal said, referring to the RBI. "So, every organization which is doing this is doing it for the first time. You will learn as you go along." Previous banknote bans have not had such a dramatic impact as they removed only a small fraction of cash from circulation. (Reuters)

Govt went ahead with demonetisation despite 'central bank concerns'

The Public Accounts Committee (PAC) of the Indian Parliament headed by KV Thomas grilled the Governor of Reserve Bank of India on Friday. Highly placed sources confirmed to WION that when members asked Urjit Patel as to who took the decision for demonetisation, Urjit Patel chose to remain silent.&nbsp;

PAC also saw a&nbsp;heated debate between the opposition and ruling party members as some members said that committee meeting was on the state of the&nbsp;economy and not demonetisation per say. Sources also said that there were many questions on demonetisation on which Urjit Patel chose to remain silent or gave general answers.

The committee members also asked the RBI governor to look into cases of irregular deposits in the cooperative banks of which he took note of. Some members also requested the RBI that it must look into the issue of cess which is charged when a digital transaction takes place. The members were of the opinion that the current reprieve should continue till things normalise in the economic system.

Sources said that Patel will be called again for questioning as many questions remained answered. Both the PAC and the Standing Committee of Finance are looking into the issue of demonetisation. 
 
(WION)

Highly placed sources told WION that Urjit Patel chose to remain silent or gave generic replies to several questions

The Public Accounts Committee (PAC) of the Indian Parliament headed by KV Thomas grilled the Governor of Reserve Bank of India on Friday. Highly placed sources confirmed to WION that when members asked Urjit Patel as to who took the decision for demonetisation, Urjit Patel chose to remain silent. PAC also saw a heated debate between the opposition and ruling party members as some members said that committee meeting was on the state of the economy and not demonetisation per say. Sources also said that there were many questions on demonetisation on which Urjit Patel chose to remain silent or gave general answers. The committee members also asked the RBI governor to look into cases of irregular deposits in the cooperative banks of which he took note of. Some members also requested the RBI that it must look into the issue of cess which is charged when a digital transaction takes place. The members were of the opinion that the current reprieve should continue till things normalise in the economic system. Sources said that Patel will be called again for questioning as many questions remained answered. Both the PAC and the Standing Committee of Finance are looking into the issue of demonetisation. (WION)

India's central bank chief remains mum during demonetisation grilling

The chief of India&#39;s central bank, Urjit Patel, received support from the most unlikely quarter while he was being grilled by an opposition party leader Digvijay Singh during a meeting with the parliamentary committee about demonetisation on Wednesday.

When asked by Digvijay Singh, a member of the Congress party, as to whether there would be chaos when the withdrawal limit is removed, former prime minister Manmohan Singh, who is also a Congress member, told Patel that he need not answer that question.

The government yesterday (January&nbsp;17) raised the withdrawal limit from Rs 4,500 per day to Rs 10,000 per day, although the weekly limit remains Rs 24,000.

It was an unexpected show of support because Singh is not only a member of the same party as Digivijay Singh is, the renowned economist has in the past flayed the government&#39;s decision to scrap old banknotes as he believes the move will pare down India&#39;s economy by two percentage points.

During the Wednesday meeting, Patel, who is the governor of Reserve Bank of India, was chastised for not satisfactorily replying to questions regarding demonetisation, nearly three weeks after the deadline for people to exchange their old currency notes with new ones elapsed.

Saugata Roy, a member of the panel and a lawmaker affiliated to Trinamool Congress, said Patel was &quot;unable to tell us how much money (old currency) has come back to the banks&quot;.

One of the members of the standing committee of finance, wishing anonymity, confirmed to WION that when asked as to when the details would be available, the RBI officials replied that they were calculating at the moment and could not give a timeline to the committee.

The federal government had given the public time till December 30 to replace their old currency notes with new ones.

As of December 14, various media reports stated that the banks in India had received 80 per cent of the old bank notes amounting to Rs 12.44 lakh crores (roughly $184 billion).

But Patel did inform the quantum of amount infused into the economy. He said Rs 9.2 lakh crore (approximately $135 billion) worth of new currency notes has been injected back into the economy so far.

The Standing Committee of Finance, headed by Veerapa Moily, grilled the finance ministry officials and Patel for nearly two hours. Overall, the meeting lasted for four&nbsp;hours but Patel joined the briefing session in the second half.

When one of the members questioned Patel on the emphasis been given by the prime minister and finance minister on turning India into a cash-less economy, Patel replied: &quot;The demand will be met with supply and it is the prerogative of the Reserve Bank of India.&rdquo;

Government officials also informed the committee that demonetisation was a well thought-out decision and preparations were on since January 2016.

India&#39;s central bank had earlier given a seven-page reply that it received advisory instructions from the government to consider the government&#39;s plan to replace the hitherto currency notes.&nbsp;But several questions were raised when it came to light that the RBI had received the advisory on November 7, barely 24 hours before the government rolled out the nationwide scheme.

India&#39;s central bank came under a deluge of criticism as many felt that the institution&#39;s autonomy had been undermined. The theme of RBI&#39;s autonomy dominated the Wednesday meeting as well, with Patel fielding a raft of questions about the issue, another member of the panel told WION.&nbsp;

Meanwhile, WION has learnt that Patel will be summoned again either during the Budget Session (February 1) or just after it as a&nbsp;lot of questions remained pending due to paucity of time.&nbsp;

But problems&nbsp;don&#39;t end for Patel there as he is expected to depose before the Public Accounts Committee on January 20, where opposition parties are expected to ask him uncomfortable questions about how the decision on demonetisation was reached upon. The very debate on demonetisation and the RBI&#39;s autonomy has become extremely political as regional elections in five states of India are merely 20 days away.&nbsp;

(WION with inputs from ANI)

&nbsp;

The former premier told Urjit Patel that he need not answer the question when asked if there would be chaos once withdrawal limit is lifted

The chief of India's central bank, Urjit Patel, received support from the most unlikely quarter while he was being grilled by an opposition party leader Digvijay Singh during a meeting with the parliamentary committee about demonetisation on Wednesday. When asked by Digvijay Singh, a member of the Congress party, as to whether there would be chaos when the withdrawal limit is removed, former prime minister Manmohan Singh, who is also a Congress member, told Patel that he need not answer that question. The government yesterday (January 17) raised the withdrawal limit from Rs 4,500 per day to Rs 10,000 per day, although the weekly limit remains Rs 24,000. It was an unexpected show of support because Singh is not only a member of the same party as Digivijay Singh is, the renowned economist has in the past flayed the government's decision to scrap old banknotes as he believes the move will pare down India's economy by two percentage points. During the Wednesday meeting, Patel, who is the governor of Reserve Bank of India, was chastised for not satisfactorily replying to questions regarding demonetisation, nearly three weeks after the deadline for people to exchange their old currency notes with new ones elapsed. Saugata Roy, a member of the panel and a lawmaker affiliated to Trinamool Congress, said Patel was "unable to tell us how much money (old currency) has come back to the banks". One of the members of the standing committee of finance, wishing anonymity, confirmed to WION that when asked as to when the details would be available, the RBI officials replied that they were calculating at the moment and could not give a timeline to the committee. The federal government had given the public time till December 30 to replace their old currency notes with new ones. As of December 14, various media reports stated that the banks in India had received 80 per cent of the old bank notes amounting to Rs 12.44 lakh crores (roughly $184 billion). But Patel did inform the quantum of amount infused into the economy. He said Rs 9.2 lakh crore (approximately $135 billion) worth of new currency notes has been injected back into the economy so far. The Standing Committee of Finance, headed by Veerapa Moily, grilled the finance ministry officials and Patel for nearly two hours. Overall, the meeting lasted for four hours but Patel joined the briefing session in the second half. When one of the members questioned Patel on the emphasis been given by the prime minister and finance minister on turning India into a cash-less economy, Patel replied: "The demand will be met with supply and it is the prerogative of the Reserve Bank of India.” Government officials also informed the committee that demonetisation was a well thought-out decision and preparations were on since January 2016. India's central bank had earlier given a seven-page reply that it received advisory instructions from the government to consider the government's plan to replace the hitherto currency notes. But several questions were raised when it came to light that the RBI had received the advisory on November 7, barely 24 hours before the government rolled out the nationwide scheme. India's central bank came under a deluge of criticism as many felt that the institution's autonomy had been undermined. The theme of RBI's autonomy dominated the Wednesday meeting as well, with Patel fielding a raft of questions about the issue, another member of the panel told WION. Meanwhile, WION has learnt that Patel will be summoned again either during the Budget Session (February 1) or just after it as a lot of questions remained pending due to paucity of time. But problems don't end for Patel there as he is expected to depose before the Public Accounts Committee on January 20, where opposition parties are expected to ask him uncomfortable questions about how the decision on demonetisation was reached upon. The very debate on demonetisation and the RBI's autonomy has become extremely political as regional elections in five states of India are merely 20 days away. (WION with inputs from ANI)

Demonetisation: Ex-PM Manmohan Singh comes to central bank chief's help

Supporting the letter written by the Reserve Bank of India (RBI) employees to Governor Urjit Patel protesting against operational &quot;mismanagement&quot; post demonetisation, Congress leader Kapil Sibal has said that the RBI was created to be independent of the government which has now been interfered during the drive.

&quot;RBI is created to be entirely independent of the government and this tradition is sought to be interfered with and I think that the feeling of the establishments are justified,&quot; Sibal told ANI.

Further commenting on the silence maintained by RBI governor over the same, Sibal said that the former may have done some things which require being silent.

In a letter, the employees said that the autonomy and image of RBI had been &quot;dented beyond repair&quot; due to mismanagement and termed the appointment of a senior Finance Ministry official for currency coordination as a &quot;blatant encroachment&quot; of the RBI`s exclusive turf.

In a strongly worded letter addressed to Reserve Bank of India (RBI) Governor Urjit Patel, the United Forum of Reserve Bank Officers and Employees have alleged that post the government&#39;s demonetisation move, the image of the Central bank has been dented beyond repair.

&quot;We request the Governor of the RBI, its highest functionary and protector of its autonomy and prestige, to do the needful urgently to do away with this unwarranted interference from the Finance Ministry and assure the staff accordingly as the staff feels humiliated,&quot; the letter added.

Various employee unions of the central bank have objected to the government &quot;impinging on RBI autonomy&quot; and have written to Patel to take action against the &quot;unwarranted interference&quot;.

Meanwhile, the Finance Ministry has clarified its stand stating that the Government fully respects the independence and autonomy of the Central Bank.

In a statement, the Ministry said that consultations between the Centre and the RBI are undertaken on various matters of public importance, wherever such consultation is mandated by law or has evolved as a practice. &quot;Consultations mandated by law or as evolved by practice should not be taken as infringement of autonomy of RBI,&quot; the statement added.

(ANI)&nbsp;

Referring to the letter written by RBI employees to the bank's Governor, Sibal said the feeling of the establishments was justified

Supporting the letter written by the Reserve Bank of India (RBI) employees to Governor Urjit Patel protesting against operational "mismanagement" post demonetisation, Congress leader Kapil Sibal has said that the RBI was created to be independent of the government which has now been interfered during the drive. "RBI is created to be entirely independent of the government and this tradition is sought to be interfered with and I think that the feeling of the establishments are justified," Sibal told ANI. Further commenting on the silence maintained by RBI governor over the same, Sibal said that the former may have done some things which require being silent. In a letter, the employees said that the autonomy and image of RBI had been "dented beyond repair" due to mismanagement and termed the appointment of a senior Finance Ministry official for currency coordination as a "blatant encroachment" of the RBI`s exclusive turf. In a strongly worded letter addressed to Reserve Bank of India (RBI) Governor Urjit Patel, the United Forum of Reserve Bank Officers and Employees have alleged that post the government's demonetisation move, the image of the Central bank has been dented beyond repair. "We request the Governor of the RBI, its highest functionary and protector of its autonomy and prestige, to do the needful urgently to do away with this unwarranted interference from the Finance Ministry and assure the staff accordingly as the staff feels humiliated," the letter added. Various employee unions of the central bank have objected to the government "impinging on RBI autonomy" and have written to Patel to take action against the "unwarranted interference". Meanwhile, the Finance Ministry has clarified its stand stating that the Government fully respects the independence and autonomy of the Central Bank. In a statement, the Ministry said that consultations between the Centre and the RBI are undertaken on various matters of public importance, wherever such consultation is mandated by law or has evolved as a practice. "Consultations mandated by law or as evolved by practice should not be taken as infringement of autonomy of RBI," the statement added. (ANI)

RBI was created to be independent of the Centre: Kapil Sibal

RBI employees who felt &ldquo;humiliated&rdquo; by events since the demonetisation move on Friday wrote a letter to RBI chief Urjit Patel against operational &quot;mismanagement&quot; in the exercise, the Press Trust of India reported.

In a letter addressed to Patel, they termed the appointment of a senior finance ministry official as a &quot;blatant encroachment&quot; on RBI&rsquo;s exclusive jurisdiction on currency management and accused the government of &quot;impinging on RBI autonomy&quot;.

&quot;An image of efficiency and independence that RBI assiduously built up over decades by the strenuous efforts of its staff and judicious policy making has gone into smithereens in no time. We feel extremely pained,&quot; the United Forum of Reserve Bank Officers and Employees said in the letter.

The letter also said the RBI&#39;s autonomy and image have been &ldquo;dented beyond repair&quot;.

At least two of the four signatories, Samir Ghosh of All India Reserve Bank Employees&#39; Association and Suryakant Mahadik of All India Reserve Bank Workers&#39; Federation, confirmed the writing of the letter, PTI reported.

The other signatories are CM Paulsil of All India Reserve Bank Officers&#39; Association and RN Vatsa of RBI Officers&#39; Association.

&quot;May we request that as the Governor of RBI, its highest functionary, and protector of its autonomy and prestige, you will please do the needful urgently to do away with this unwarranted interference from the Ministry of Finance, and assure the staff accordingly, as the staff feel humiliated,&quot; the letter said.

&ldquo;We want to reiterate that the RBI is fully capable of coordinating its currency chest operations. We do not need assistance from anywhere,&rdquo; the forum leaders said.

(WION with inputs from PTI)

Their letter complained about the operational 'mismanagement' of demonetisation and the government impinging on the central bank's autonomy

RBI employees who felt “humiliated” by events since the demonetisation move on Friday wrote a letter to RBI chief Urjit Patel against operational "mismanagement" in the exercise, the Press Trust of India reported. In a letter addressed to Patel, they termed the appointment of a senior finance ministry official as a "blatant encroachment" on RBI’s exclusive jurisdiction on currency management and accused the government of "impinging on RBI autonomy". "An image of efficiency and independence that RBI assiduously built up over decades by the strenuous efforts of its staff and judicious policy making has gone into smithereens in no time. We feel extremely pained," the United Forum of Reserve Bank Officers and Employees said in the letter. The letter also said the RBI's autonomy and image have been “dented beyond repair". At least two of the four signatories, Samir Ghosh of All India Reserve Bank Employees' Association and Suryakant Mahadik of All India Reserve Bank Workers' Federation, confirmed the writing of the letter, PTI reported. The other signatories are CM Paulsil of All India Reserve Bank Officers' Association and RN Vatsa of RBI Officers' Association. "May we request that as the Governor of RBI, its highest functionary, and protector of its autonomy and prestige, you will please do the needful urgently to do away with this unwarranted interference from the Ministry of Finance, and assure the staff accordingly, as the staff feel humiliated," the letter said. “We want to reiterate that the RBI is fully capable of coordinating its currency chest operations. We do not need assistance from anywhere,” the forum leaders said. (WION with inputs from PTI)

'Humiliated' RBI staff write to Urjit Patel, say bank's image 'dented beyond repair'

The chief of India&#39;s central bank on Wednesday warned the federal government that not wresting a ballooning fiscal deficit might cause long-term economic damage.

Reserve Bank of India governor Urjit Patel said not reducing the high borrowing levels was also hampering the country&#39;s sovereign ratings.

Patel, speaking at an investors&#39; summit in India&#39;s western Gujarat state, said both the federal government and state governments had to &quot;take cognisance&quot; of the matter to &quot;mitigate financial volatility&quot; in near future.

India&#39;s total fiscal deficit is targeted at 6.4 per cent of GDP in 2016-17, which is above the norm for most emerging markets and G20 countries. In comparison, China&#39;s government deficit was a little above two percentage points in 2016.

Patel&#39;s comments come weeks before the Narendra Modi administration is set to announce its annual budget.&nbsp;

The high debt burden has also scuttled India&#39;s chance of upgrading credit rating. Recently, Reuters had reported that the Indian government had pushed Moody&#39;s to get a better rating from its existing Baa3 rating -- the lowest investment grade.

But the international credit rating agency remained unmoved, with&nbsp;the company&#39;s senior vice president and sovereign analyst&nbsp;Marie Diron reasoning that high debt levels and the saddled banking sector&nbsp;were key reasons for the status quo.

(WION with inputs from Reuters)

&nbsp;

India's total fiscal deficit is targeted at 6.4 per cent of GDP in 2016-17, which is higher than most G20 countries

The chief of India's central bank on Wednesday warned the federal government that not wresting a ballooning fiscal deficit might cause long-term economic damage. Reserve Bank of India governor Urjit Patel said not reducing the high borrowing levels was also hampering the country's sovereign ratings. Patel, speaking at an investors' summit in India's western Gujarat state, said both the federal government and state governments had to "take cognisance" of the matter to "mitigate financial volatility" in near future. India's total fiscal deficit is targeted at 6.4 per cent of GDP in 2016-17, which is above the norm for most emerging markets and G20 countries. In comparison, China's government deficit was a little above two percentage points in 2016. Patel's comments come weeks before the Narendra Modi administration is set to announce its annual budget. The high debt burden has also scuttled India's chance of upgrading credit rating. Recently, Reuters had reported that the Indian government had pushed Moody's to get a better rating from its existing Baa3 rating -- the lowest investment grade. But the international credit rating agency remained unmoved, with the company's senior vice president and sovereign analyst Marie Diron reasoning that high debt levels and the saddled banking sector were key reasons for the status quo. (WION with inputs from Reuters)

Reduce borrowing levels to avoid economic volatility, warns RBI

A parliamentary committee has asked the governor of India&#39;s central bank to appear before it and explain how the decision of demonetisation was taken and for details on how it has impacted the economy, Reuters reported.

The Public Accounts Committee (PAC), which is probing the government&#39;s decision to scrap high-value Rs 500 and Rs 1000 bank notes (($7.34-$14.69) has asked Reserve Bank of India (RBI) governor, Urjit Patel, to appear before it on January 20, the commmitte&#39;s chairman, KV Thomas, also a senior member of the opposition Congress party, told Reuters.

The PAC has asked Patel to provide details on the value of currency that has been returned to the bank, the quantity of 
&quot;black money&quot; it has received and the amount of new currency released so far, Thomas said.

The committee has sent the RBI governor a list of questions on the demonetisation process. It has also asked other finance ministry officials, including the revenue secretary and finance secretary to appear before it, Thomas said.

In an unexpected move, PM Modi announced the demonetisation of Rs 500 and Rs 1000 notes on November 8 to curb the influence of black money circulating in the economy.

The opposition parties have criticised the government and the central bank over shortages of new currency notes and restrictions on depositing old notes that have caused long queues at banks and ATMs.

Thomas added that the governor has also been asked about the country&#39;s preparedness to handle cashless transactions.

&quot;We had decided to call the RBI governor sometime in December but because the prime minister had asked for 50 days, we 
decided to postpone it to sometime January,&quot; Thomas told Reuters. &quot;We did not want to give it a political colour.&quot;

Urijit Patel is already set to testify before another parliamentary committee on the demonetisation issue.

Last month, the RBI unexpectedly kept its key policy rate unchanged at 6.25 per cent, despite calls for action in the face of an intense cash shortage. The bank was widely expected to cut the rate by at least 25 bps. 
 
(WION with inputs from Reuters) 
&nbsp;

RBI governor Urjit Patel has been asked to explain how the decision of demonetisation was taken

A parliamentary committee has asked the governor of India's central bank to appear before it and explain how the decision of demonetisation was taken and for details on how it has impacted the economy, Reuters reported. The Public Accounts Committee (PAC), which is probing the government's decision to scrap high-value Rs 500 and Rs 1000 bank notes (($7.34-$14.69) has asked Reserve Bank of India (RBI) governor, Urjit Patel, to appear before it on January 20, the commmitte's chairman, KV Thomas, also a senior member of the opposition Congress party, told Reuters. The PAC has asked Patel to provide details on the value of currency that has been returned to the bank, the quantity of "black money" it has received and the amount of new currency released so far, Thomas said. The committee has sent the RBI governor a list of questions on the demonetisation process. It has also asked other finance ministry officials, including the revenue secretary and finance secretary to appear before it, Thomas said. In an unexpected move, PM Modi announced the demonetisation of Rs 500 and Rs 1000 notes on November 8 to curb the influence of black money circulating in the economy. The opposition parties have criticised the government and the central bank over shortages of new currency notes and restrictions on depositing old notes that have caused long queues at banks and ATMs. Thomas added that the governor has also been asked about the country's preparedness to handle cashless transactions. "We had decided to call the RBI governor sometime in December but because the prime minister had asked for 50 days, we decided to postpone it to sometime January," Thomas told Reuters. "We did not want to give it a political colour." Urijit Patel is already set to testify before another parliamentary committee on the demonetisation issue. Last month, the RBI unexpectedly kept its key policy rate unchanged at 6.25 per cent, despite calls for action in the face of an intense cash shortage. The bank was widely expected to cut the rate by at least 25 bps. (WION with inputs from Reuters)

Parliamentary committee to question governor of India's central bank over demonetisation

Urjit Patel, the governor of Reserve Bank of India -- the country&#39;s central banking institution, was under the cosh during his Kolkata trip on Thursday as Congress and&nbsp;Trinamool Congress supporters waved black flags and resorted to high-decibel sloganeering to mark their protest against demonetisation.

Black flags and chants of &#39;go back Urjit&#39; followed Patel wherever he went&nbsp;-- he was first greeted with derision by Trinamool Congress workers when he visited RBI&#39;s regional office in West Bengal&#39;s capital city of Kolkata and a few hours later, he was condemned to a similar behaviour when he reached the airport.

The Left in the city were in good numbers as well to rail against the government&#39;s decision to flush out old currency notes.

Patel was in India&#39;s eastern city of Kolkata to take stock of the situation in east and northeast India in the aftermath of the unprecedented and unexpected cash scrap.

In the morning, Patel reached RBI&#39;s Kolkata branch to convene a central board meeting much ahead of the scheduled time of 10 am and entered the building from the rear side&nbsp;to evade media spotlight. But supporters of Trinamool Congress, which enjoys formidable support in Bengal, had already massed outside the building to wave black flags and raise anti-establishment cries.

Patel subsequently met Trinamool chief and West Bengal chief minister Mamata Banerjee at 3.30 in the afternoon to discuss issues plaguing the banks in the state.

&quot;From Maharashtra to Gujarat, Uttar Pradesh to Bihar, Chennai to Kolkata I gave my views on behalf of the commoners. But after meeting him, I felt immensely satisfied as I got an opportunity to express my views before him,&quot; Banerjee later told a media gathering.

And when he reached the Kolkata International Airport, he was subjected to similar vitriol as Congress workers allegedly heckled him. The 53-year-old economist&nbsp;had to be escorted inside the airport by the police.

Both Trinamool Congress and the Congress have been vociferous opponets of the demonetisation policy.

(WION)

&nbsp;

Congress and?Trinamool Congress supporters waved black flags and resorted to high-decibel sloganeering to mark their protest

Urjit Patel, the governor of Reserve Bank of India -- the country's central banking institution, was under the cosh during his Kolkata trip on Thursday as Congress and Trinamool Congress supporters waved black flags and resorted to high-decibel sloganeering to mark their protest against demonetisation. Black flags and chants of 'go back Urjit' followed Patel wherever he went -- he was first greeted with derision by Trinamool Congress workers when he visited RBI's regional office in West Bengal's capital city of Kolkata and a few hours later, he was condemned to a similar behaviour when he reached the airport. The Left in the city were in good numbers as well to rail against the government's decision to flush out old currency notes. Patel was in India's eastern city of Kolkata to take stock of the situation in east and northeast India in the aftermath of the unprecedented and unexpected cash scrap. In the morning, Patel reached RBI's Kolkata branch to convene a central board meeting much ahead of the scheduled time of 10 am and entered the building from the rear side to evade media spotlight. But supporters of Trinamool Congress, which enjoys formidable support in Bengal, had already massed outside the building to wave black flags and raise anti-establishment cries. Patel subsequently met Trinamool chief and West Bengal chief minister Mamata Banerjee at 3.30 in the afternoon to discuss issues plaguing the banks in the state. "From Maharashtra to Gujarat, Uttar Pradesh to Bihar, Chennai to Kolkata I gave my views on behalf of the commoners. But after meeting him, I felt immensely satisfied as I got an opportunity to express my views before him," Banerjee later told a media gathering. And when he reached the Kolkata International Airport, he was subjected to similar vitriol as Congress workers allegedly heckled him. The 53-year-old economist had to be escorted inside the airport by the police. Both Trinamool Congress and the Congress have been vociferous opponets of the demonetisation policy. (WION)

Demonetisation: RBI governor heckled by Congress, Trinamool supporters in Kolkata

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