At the board meeting, RBI governor Urjit Patel and his deputies are expected to support its mission to clean up the bank's balance sheets. The Opposition has been strident in its criticism of the government's "interference" with the RBI Board.
"November 19 will be a day of reckoning for central bank independence and the Indian economy", he tweeted. "Hope Urjit Patel has a spine and will show PM his place", the Congress president tweeted shortly after the RBI board meeting began, referring to the RBI governor.
"The Reserve Bank of India Governor should work in sync with the government or otherwise resign", SJM's co-convener Ashwani Mahajan had said.
As a result of the relaxation, some banks may come out of the PCA framework by the end of this fiscal.
In fact, it was Acharya's speech that marked the turning point in a simmering dispute between RBI and the Union government, which has been particularly incensed over the last few months about what it believes are lapses in regulatory oversight of the financial sector: first, in not capturing the Punjab National Bank fraud and second, missing the crisis building up at Infrastructure Leasing and Financial Services Ltd (IL&FS), which in turn is threatening to cascade into a wider crisis at non-banking financial companies (NBFCs). "Most central banks don't have reserves of this kind at all, only RBI has these kinds of reserves", he said on 15 November in an address at the Vivekananda International Foundation. If you strictly go as per the regulations section 7 (2) and section 7 (1) of the RBI Act, it gives the board full powers to do all the acts and things subject to government regulations.
The corrective action plan has led to a sharp slowdown in lending in 11 state-owned banks.
That has left traders still anxious to see how far the central bank might be ready to compromise to meet the government's demands.
The third most contentious issue between the RBI and the government is cash reserves. Reports suggested the finance ministry had proposed to the RBI to transfer a surplus of Rs 3.6-lakh crore from the RBI's reserves to the government, to be managed jointly by both. "Lot of misinformed speculation is going around in media".
Economic Affairs Secretary Subhash Chandra Garg had also clarified that the government wasn't in any dire needs of funds and that there was no proposal to ask the RBI to transfer Rs 3.6 lakh crore.
However, the Congress party accused the BJP of trying to seek funds from the RBI to offer freebies before the next Lok Sabha polls. "The facts which are emerging in the public space, the government wants the RBI to part with Rs 3.6-lakh crore out of Rs 9.59-lakh crore which constitutes the cash reserve of the RBI".