New Delhi - The RBI’s board meeting on November 19 is expected to be a stormy affair in the backdrop of the ongoing tussle between the government and the central bank, sources said, adding that some members are likely to raise issues concerning capital framework, management of surplus and liquidity measures for MSMEs.
Tensions between the RBI and the government have recently escalated, 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.
According to sources, the board meetings are pre-decided and the agenda is also circulated much in advance. However, board members can raise off-agenda items in the meeting.
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.
The RBI is following conservative capital adequacy norms which are stricter than those in advanced economies, leading to banks keeping more risk capital reserve against loans.
The government is of the view that if the RBI aligns it with the global average, it would free up bank capital which can be used for increased lending to productive sectors, sources said.