RBI’s 9-Hour-Long Meeting Comes to an End; New MSME Scheme, Loans Up to Rs 25 Crore Approved: Sources

File photo of RBI headquarters in Mumbai. (Reuters)

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New Delhi: The Reserve Bank of India’s (RBI) much-awaited board meeting that began on Monday morning ended after nine hours of deliberation. While most of the contentious issues remained inconclusive, the board zeroed in on a new scheme for the medium and small scale enterprises (MSME) industry, which will now allow loans up to Rs 25 crore.

The board also agreed to ease liquidity for the financial sector, however, there was no concrete data to support a conclusion. The matter has therefore been deferred to the December 14 meeting of the central bank.
The RBI will also form a separate panel to review its surplus funds and transfers to government. The final call for the formation of the panel will be taken by Finance Minister Arun Jaitley and the RBI. Meanwhile, the existing panel will be looking into issues related to Prompt Corrective Action (PCA). “A panel will be formed to work out a framework to determine the reserves requirements of the RBI and transfer surplus funds to the government,” a board member said.

The government has been pressuring the RBI to reduce capital ratios for banks to speed up loans to small businesses.
“The meeting happened in a very cordial environment. Most of the issues were resolved in an amicable manner,” a board member, who attended the meeting, said.

The heated exchange of words between the apex bank and the Centre preceding the meeting had come to an end with the government issuing a statement assuring RBI’s autonomy. In a statement on October 31, the Finance Ministry had said, “Autonomy for the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement.”

The board that met on Monday had a total of 18 members. Five, including the governor, belong to the RBI and the rest are government nominees. It is expected that the central bank will have a tough time coming to a conclusion with the government nominees. RBI Governor Urjit Patel had earlier this month met Prime Minister Narendra Modi and Jaitley to discuss some of these contentious issues.