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Editor’s Note

RBI-Government row:

Centre tells who is the boss?

IN THE END, both the Reserve Bank mittee. The RBI also gave in on the issue of the Basel
of India and the government have capital framework for banks and easing credit flow to
realized that escalation of the micro, small and medium enterprises. By allowing debt
confrontation would do no good recast for MSME borrowers of up to 25 crore, the RBI
to any side. The crucial meeting has attempted to address their credit concerns, which
of the RBI Board held on Novem- was one of the major demands of the Centre, which was
ber 21 clearly showed that the gov- desperate after the crunch hit the NBFCs. Surely, the
ernment and the RBI have called it a government had a valid point.
truce, though it may be temporary armi- However, when the term of a democratically
stice and chose to tread a middle path, buying time and elected government is at its fag ends, it must wait
space to end stubbornness. It would be difficult to point patiently wait for a fresh mandate before taking major
out who is the winner because both sides appeared decisions. Ideally, the government should not touch
retrieving a step in their known stands. Indeed the the reserves without either amending the RBI Act or
meeting passed off sans brickbats and the RBI issued convincing the Parliament about its intent. It is on
a succinct statement at the end of the nine-hour-long these lines, that post meeting, the Finance Minister
marathon meeting. made it known that India does not need money from
However, one can draw a safe conclusion that the RBI in the next six months. It is a rebuttal to oppo-
the Reserve Bank of India’s Board would emerge all- sition charges that the government was seeking ac-
powerful in near future. Now the external directors cess to the RBI’s reserves to fund schemes ahead of the
numbering 13, including two government nomi - 2019 general election. Insiders say there was enough
nees would be able to exert more influence over the give-and-take in the meeting but it was the RBI Board
working of the RBI. At the meeting, the decisions taken for the first time in recent memory that appeared
by the Board addressed the concerns of both the Centre more than an ornamental advisory body. Indeed
and the RBI. the Centre gave a clear message as to who is the
The Apex bank has agreed to set up a winner and who is the boss?
committee to examine relaxation of the Prompt
Corrective Action framework of 11 public sector banks
and provision of liquidity for non-banking finance
companies. The Centre and the RBI will jointly decide
the formation and terms of reference of the com - (CHARANJIT AHUJA)

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VOLUME 15, ISSUE NO. 23, 1-15 DECEMBER 2018, RELEASED ON 1 DECEMBER, NUMBER OF PAGES INCLUDING COVER 68
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