RBI Board Meet

  • The BSE benchmark Sensex rallied over 300 points on Monday to end at over a six-week high of 35,775 as investors widened their portfolios ahead of the RBI’s board meet outcome amid foreign fund inflows.
  • Also, positive cues from other Asian markets and a firm opening in European shares buoyed investor sentiment in India.
  • A crucial meet of the Reserve Bank’s central board was held on Monday amid a rift between the central bank and the government over the future course of policies.
  • The finance ministry nominees and some independent directors were expected to take on RBI Governor Urjit Patel and his team over issues ranging from MSME credit to the central bank’s reserves, though both sides are in favour of reaching a common ground.
  • Expectations of a positive outcome boosted market mood after the meeting began.

The Tussle:

  • The discussion tries to sort out some major issues like
  • Capital norms of the banks on surplus i.e., the forex.
  • Discussion about easing of the prompt corrective action plan to ease it as it will help the distressed banks to lend.
  • A say in liquidity condition.

MSME credit lending.

  • The RBI has taken up two issues for discussion. They are prompt action plan and fixing the issue of governance in RBI.
  • Prompt corrective action plan to be examined by RBI department on banks issue.
  • Debt recast for MSME borrowers with loans of up to rupees 25 Cr. To be considered.
  • Technical committee to be set up to examine the Economic Capital Framework of RBI.
  • No change in basel norms, Deadline pushed back by a year for the last tranche.

Establishment:

  • The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and where policies are formulated.
  • Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India.

Preamble:

  • The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as:
  • “to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth.”

Central Board

  • The Reserve Bank’s affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act.
  • Appointed/nominated for a period of four years

Constitution:

  • Official Directors
  • Full-time: Governor and not more than four Deputy Governors
  • Non-Official Directors
  • Nominated by Government: ten Directors from various fields and two government Official
  • Others: four Directors – one each from four local boards.
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