Two Key Aspects From RBI's First Post-Urjit Patel Board Meeting: One Stated, One By Omission

Written By Ankit Prasad | Mumbai | Published:


  • The RBI has held its first board meeting since Shaktikanta Das took over as RBI Governor
  • A statement has been issued, which contains two key aspects, one stated and one by omission

The Reserve Bank of India (RBI) has issued a statement following its first board meeting since the resignation of Urjit Patel and the appointment of Shaktikanta Das as RBI Governor:

The Reserve Bank of India’s (RBI) Central Board met today in Mumbai under the Chairmanship of Shri Shaktikanta Das, Governor, Reserve Bank of India. The Central Board placed on record its appreciation of the valuable services rendered by Dr. Urjit R. Patel during his tenure as Governor and Deputy Governor of the Bank. The Board deliberated on the Governance Framework of the Reserve Bank and it was decided that the matter required further examination. The Board reviewed, inter alia, 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 draft report on Trend and Progress of Banking in India (2017-18) was also discussed.

The key aspect from the statement is "The Board deliberated on the Governance Framework of the Reserve Bank and it was decided that the matter required further examination", which could potentially mean a number of things and needs further substantiation.

Another key aspect of the statement (by omission) is that there is no update on one of the most contentious matters in the recent RBI versus government tussle - the formation of an expert committee to evaluate the central bank's Economic Capital Framework (ECF) which was spoken of in the earlier marathon meeting of the RBI's board on November 19. Inferring from the statement, the committee hasn't yet been constituted.

The RBI's statement post the November 19 board meeting stated the following:

The matter is of importance as the meeting comes just a day after tweets issued by union minister Piyush Goyal for the first time revealed a possible end use that the government may have in mind for the RBI's surplus reserves. The Railway minister, who was also the interim Finance Minister while Arun Jaitley was on medical leave, tweeted the following:

His reference is to the events in the US in 2008 when banks were bailed out to the tune of hundreds of billions of dollars following the sub-prime crisis. This is the first time a bank bailout is being spoken of in such clear terms by someone in such a senior position in the government of India. The only other use that has been proposed has been impossible to differentiate from a political attack -- the Congress' contention that the government wants to use the reserves for 'populist doles'. The Congress has also attacked him for the 2008 comparison:

Das, who only took over at the RBI on Wednesday, held a meeting of the MD-CEOs of Mumbai-headquartered Public Sector Banks on Thursday making clear that his immediate priority is to augment the banking sector which has faced numerous travails in recent years, including enormous Non-performing assets (NPAs) and scams such as the Nirav Modi-Mehul Choksi PNB Bank fraud. 

Piyush Goyal had also tweeted extensively on several of the matters that were highlighted as being points of contention between the RBI and the government, including the autonomy of the central bank and the government of invoking Section 7 of the RBI Act that allows the government to issue direction to the RBI in the public good:

On Thursday, Finance Minister Arun Jaitley had also spoken about the appointment of Shaktikanta Das, in light of the 1980 batch IAS officer facing criticism for being the first non-Economist to be appointed RBI Governor in 28 years:

"I think he has the right credentials, he has been extremely professional. He has worked under various governments, has excelled himself and I am sure in meeting the challenges before India's economy as a Governor of RBI. He'll certainly add to that office."