The Executive may not give the RBI a direction under section 7


The Union government can not appeal to Section 7 of the RBI Act to provide guidance to its central bank, in a & # 39; trying to reduce the struggle between North Block and Mint Road, private resources to government thinking. The HinduSouth Westerly

"It is acknowledged that the government has decided not to send directions to the RBI … it is a feeling that the tension is not required to increase," said store.

The board will be at the center of the RBI Monday to discuss the significant issues that appeared at his / her. last board meeting – economic capital, main bank management issues, small, medium and small enterprise enhancement and correction function (PCA) framework for banks.

Missing the board meeting on October 23 was reached on any of the cases and was deferred after an eight hour debate.

Although the government provided Section 7 of the RBI Act for & # 39; consulting on these issues, maybe he will continue to give directions because such a big move is moved.

Section 7 has never been used in its 83-year history to bank. Invite him would be defined as an attack in the middle devolution of his & her; bank. It would also affect international organizations such as the International Money Fund (IMF) issuing standards for middle banks. "These groups have been asking Section 7 questioning for something now saying," if such provision is, how is RBI independent? "However, the RBI has been telling them even though that provision has not been used," said another source.

In order to meet the government half-time, the RBI can take steps to encourage loans to the MSME department that has been badly damaged by the proxy exercise, and which the government wants to support in a year of election. However, it can be seen how much the RBI can do, because some of the defenses may have a "#; Central Bank about the region's financial capability at this time in due course.

The RBI can also be able to climb from a tight mode setting to the PCA framework for banks. Most of the 11 public sector banks out of 21 are under PCA, which the government has committed to; think to prevent loan growth. RBI can reduce some of the conditions, which can help some of the lenders come out of PCA.

The RBI and the Center can also reach agreement to create two committees, to address the RBI economic capital issue and other regulatory issues.

"The economic capital problem is technical and a decision on such a case can not be reached in a two-hour board meeting," said a source.

On a regulatory case, it's a & # 39; It continues to feel that the RBI management needs to be accountable to the board. The board so far has hindered the inclusion of specific business-related business and b & The main objective is to provide a broader perspective for the main bank. It was argued that the main bank has been traveling on a variety of topics – such as not going to & # 39; IL & FS emergency expectations and poor governance in a fraud case at the Punjab National Bank – and that management should be accountable to the board.

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