Reserve Bank of India (RBI) Governor Urjit Patel on Wednesday refused to take any questions about the central bank's alleged rift with the Union government, including the invocation of Section 7 of the RBI Act earlier this year.
"I would avoid those questions because we are here discussing the monetary policy resolution," Patel said when asked about Section 7 of the RBI Act during a media conference after the bank's bi-monthly meeting of the Monetary Policy Committee (MPC) here.
When asked about his views on Deputy Governor Viral Acharya's public posturing on the RBI autonomy, Patel said, "Is this related to the MPC resolution? I don't think so. We are here to discuss the MPC resolution and the macro-economy."
According to Section 7(1) in The Reserve Bank of India Act, 1934, "The Central Government may, from time to time, give such directions to the RBI as it may after consultation with the Governor of the Bank consider necessary in the public interest."
In view of the current and evolving macroeconomic situation in the country, the RBI on Wednesday decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5 per cent. The decision was taken at the fifth bi-monthly meeting of the Monetary Policy Committee (MPC). The Central bank pegged India's gross domestic product (GDP) growth rate for the financial year of 2018-19 at 7.4 per cent and 7.2 per cent in H2.
It is worth mentioning that surplus reserves and relaxing of PCA norms were discussed in the RBI Board meeting held on November 19. In a press statement released after the meeting, the RBI had said that its Central Board discussed the Basel regulatory capital framework, a restructuring scheme for stressed MSMEs, bank health under the Prompt Corrective Action (PCA) framework and the Economic Capital Framework (ECF) of the RBI.
The Board decided to constitute an expert committee to examine the ECF, the membership and terms of reference, which will be jointly determined by the central government and the RBI. With regard to the banks under PCA, it was decided that the matter would be examined by the Board for Financial Supervision of RBI.