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Is Modi govt dissatisfied with functioning of RBI? This is what Arun Jaitley said

The Central Bank Vs Modi Govt Reached A Flash Point With Urjit Patel Suddenly Quitting The RBI On December 10.

PTI | Updated on: 29 Dec 2018, 11:16:22 AM
The government and the RBI under the previous Governor Urjit Patel were at loggerheads on several issues, including over appropriate size of reserves which the central bank should hold. (File photo)

New Delhi:

Union Finance Minister Arun Jaitley on Friday replied in negative to a question whether the government was not satisfied with the functioning of the Reserve Bank of India. In a written reply to the Lok Sabha, the minister quoted a report of International Monetary Fund (IMF) which said the supervision and regulation by the RBI was strong and improved in recent years. "No, madam," Jaitley said to a question whether the government is not satisfied about the functioning of the RBI. The government and the RBI under the previous Governor Urjit Patel were at loggerheads on several issues, including over appropriate size of reserves which the central bank should hold.

There were also differences over the lending to the small and medium enterprises, and norms concerning supervisory action over public sector banks under Prompt Corrective Action (PCA) of the RBI.

The differences reached a flash point with Patel suddenly quitting the RBI on December 10.

Patel's resignation was being speculated right from the time the government cited a never-before-used provision of the RBI Act to get him to consider its views on relaxing lending norms for segments such as small and medium enterprises, appropriate size of reserves the central bank must maintain and easing norms for weak banks.

Earlier, RBI Deputy Governor Viral Acharya had raised concerns over the autonomy of the central bank, triggering speculations that the government and the central bank were not same page on many issues. Meanwhile, the RBI has said that banks under PCA have reported slower NPA growth in FY18. The 11 public sector banks that are under the prompt corrective action (PCA) framework have shown lower growth in gross non-performing assets as against non-PCA banks, the Reserve Bank said in a report Friday.

Of the 21 state-owned banks, as many as 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders. These 11 banks constitute a fifth of the system-wide credit and deposits.

These are Allahabad Bank, United Bank, Corporation Bank, IDBI Bank, Uco Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.

The PCA banks have also increased recoveries, while containing the growth in advances and deposits, reducing riskiness of assets and focusing on better rated assets.

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First Published : 29 Dec 2018, 07:45:46 AM

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