RBI’s governance needs examination: Board

All eyes were on the RBI’s central board which was meeting on Friday for the first time since Urjit Patel’s exit and Shaktikanta Das’ swift appointment as RBI governor. Analysts and experts were keeping an eye out for any decisions or announcements especially with respect to changes in prompt corrective action (PCA) norms and governance matters.

However, the meeting did not result in any major decision or announcement. In a statement released after the meeting concluded, the central bank said “the board deliberated on the Governance Framework of the Reserve Bank and it was decided that the matter required further examination.”

RBI also said the board reviewed “the current economic situation, global and domestic challenges, matters relating to liquidity and credit delivery to the economy, and issues related to currency management and financial literacy.”

The board meeting came just a day after railway minister Piyush Goyal slammed the RBI in a series of tweets. “Without any reference to the board of directors, suddenly on 1st April 2017, RBI drastically changed the Prompt Corrective Action framework. This is not there anywhere in the world. It was like changing the rules of the game midway into the match. This has not been debated enough,” he tweeted.

In another tweet he said, “ There was never any intention that RBI’s capital should be transferred to Government. But their capital reserves are amongst the highest and are not being put to good use. It could possibly have been used to support the Banks just as was done in USA during the financial crisis.”

Das seems to have hit the ground running for his new role at the RBI. On Wednesday, in what a TV news channel referred to as mooh dikhaai (a post-wedding ceremony in which the bride is introduced to the groom’s family, literally translating to ‘showing one’s face’), newly appointed RBI governor Shaktikanta Das held a press conference on his very first day.

Addressing the media in Mumbai on Wednesday, Das began with an apology to media persons in Delhi who had been trying to reach him with no luck; a stark contrast from his predecessor Urjit Patel who was famous for not speaking to the press. What was also striking was that Das made a solo appearance, sans any deputy governors flanking him, unlike Patel’s appearance at the monetary policy announcements.

Praising the RBI’s “long and rich legacy”, the new governor stressed that he will “do everything that is possible to uphold the professionalism, the core values, the credibility and the autonomy of the institution”.

Das went on to say that he will look to undertake “consultations with all stakeholders wherever necessary”. In fact, consultations with stakeholders emerged as a recurring theme throughout the press conference; perhaps a clear indication of efforts to mend the reportedly frayed ties between the government and the central bank.

Remember, reports of tension between the centre and the RBI have been doing the rounds ever since deputy governor Viral Acharya delivered a speech in October emphasising on the need to protect the central bank’s autonomy. The government and the RBI reportedly clashed over issues like prompt corrective action (PCA) norms for public sector banks and transfer of excess capital to the government.

When asked about the central bank’s relationship with the government, Das said the government is not just a stakeholder but also manages major policy decisions. “There have to be free, fair and frank discussions between the government and the RBI,” he said.

Das’ first move as the 25th governor of the RBI will be a meeting with the heads of public sector banks based in Mumbai on Thursday, followed by a meeting with banks outside Mumbai in a few days. For the meeting with PSU banks on Thursday, Das said there was no specific item on the agenda and that he was open to discussing all issues, including PCA.

He also said that the issue of liquidity is one where interaction with stakeholders is necessary. Das then clarified that the board meeting scheduled to be held on Friday will continue as planned.