The RBI board chose to set up a high-powered committee to examine issues related to surplus capital of Rs 9.69 lakh crore with the central bank and advised it to consider a scheme for restructuring stressed assets in the MSME sector.
The RBI's central board now has 18 members, including Governor Urjit Patel and his four deputies as full-time official directors, while the rest have been nominated by the government, including the Economic Affairs and Financial Services Secretaries.
The deferment by a year for a part of the additional capital framework is a small give-away in the face of the Centre's demand for relaxation of the capital ratio itself.
According to one of the RBI directors, yesterday's meeting was "hard-fought but at the same time cordial".
Finally, after all the pre-match sledging, the game seems to have gone off smoothly with both sides playing responsibly. The board decided that the said committee will look into the future and not dwell on past instances. The meeting became necessary as RBI and the central government are now not on good terms, and their opinions when it comes to financial stability of the Indian system, differed to quite an extent.
As many as 11 banks with high non-performing assets and weak balance sheets have been brought under the prompt corrective action plan.
The issues ranged from the government wanting the RBI to ease some norms so that banks could easily lend money.
YouTube and MGM Debut Over 100 Movies Streaming for Free
YouTube is reportedly letting viewers in the United States watch classic films like Rocky and The Terminator for free. Some of the more notable titles include Igor , numerous Rocky films, The Terminator , Saved , and Hackers .
The appointment of three new directors- S Gurumurthy, Subhash Chandra Garg and Rajiv Kumar - in the RBI board is seen as government's efforts to oversee the bank's function. This was done after the central bank was convinced that the financial mess in these banks was too severe to let them operate freely like healthy banks. This, too, will ease the burden on the government which is the majority owner in state-run banks that dominates 70 percent of the assets in the banking sector and will have to infuse large amount of capital in these banks.
"With regard to banks under PCA, it was decided that the matter will be examined by the Board for Financial Supervision (BFS) of RBI."Probably, this will be discussed at the next board meeting.
The current economic capital framework followed by the RBI is not in public domain. RBI has agreed to ease liquidity.
The central bank appears to have not budged and has retained the risk-weighted assets ratio (CRAR) at 9%.
However, it made a decision to extend the transition period for implementing the last tranche of the capital conservation buffer (CCB) of 0.625 per cent by a year till March 2020.
"Clearly, the government does not have the capital, because of the budget deficit issues, and clearly, the banks need the capital". Besides, banks are expected to get a boost with the easing of norms on the Capital Conservation Buffer which is the extra capital banks hold above their mandatory capital and in terms of pushing back the deadline for transition to the globally recognised Basel norms by one more year - to end of March 2020.