Well Done, RBI : Professional handling of a delicate situation

Well Done, RBI

For the last one month, the name of India's central bank was the single 3 letters used for the maximum number of times in print, electronic and social media. For all the wrong reasons. Like:
1) An assumed threat of Centre invoking Section 7 of RBI Act to discipline RBI
2) The possibility of Governor Urjit Patel and some of his 4 deputies resigning, if (1) materialized
3) Differences in policy perceptions (some real and some assumed) between GOI and RBI
The RBI central board meeting became the talk of the town in the above context. The speculations continued until the release of a press statement after concluding the meeting, late in the evening on November 19, 2018.
RBI handled the challenge professionally.
Well Done, RBI!
Raghuvir Srinivasan (The Hindu, November 20) has summed up the episode excellently well. I quote:
“The Reserve Bank of India seems to have carried the day, after all, in Monday’s Marathon 9-hour meeting.
Going by the brief statement that it put out, of the six deliveries that it had to play, the RBI has shouldered arms to two — PCA relaxation and capital framework which have been referred for expert study; deftly glanced two more — on liquidity for NBFCs and governance of the central bank — to the next board meeting, and effectively fended off the last two bouncers on capital norms and MSME borrowings. 
Interestingly, of the two issues on which the RBI has seemingly conceded, the concessions are minimal and appear mainly designed for optics so that the government can have something to take back to Delhi from Mumbai.
The deferment by a year for a part of the additional capital framework is a small giveaway in the face of the Centre’s demand for relaxation of the capital ratio itself.
Similarly, the MSME credit recast concession is not a big one considering the demand from the Centre was for easier NPA norms for the sector and more credit flow.
Finally, after all the pre-match sledding, the game seems to have gone off smoothly with both sides playing responsibly”.
M G Warrier, Thiruvananthapuram
November 20, 2018

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