RBI and Indian Government Tussle - 2018 , MBA -Placement For Academics Use

1. MBA –AcademicUse krishna.khandelwal2010@yahoo.com
RBI Vs Govt
Interest Rate  Urjit patel started his tenure by supporting Govt on demonetization.
 But ties soon ove the issue of interest rates
 When the MPC refused to meet the CEA Arvind Subramanian
 Arvind Subramanian reacting to MPC refusal to cut interest rate on june 7,2018
Dividend Payment  RBI surprised govt by transferring only Rs 30000 crore against budgeted 6000 crore
 FinMin seeking higher payout
Loan Restructuring  In Feb, RBI Banned all loan restructuring scheme
 Asked banks to set aside funds for potential losses even in case of one day default
 Govt and Banks protested , calling it unfeasible
PSB Regulation  Govt ticked off RBI for Failure to detect Nirav Modi Fraud at PNB
 Patel responded by blaming govt for not giving RBI same powers to regulate PSB as those for Private Bank
 FinMin Hit back saying RBI had adequate powers and was even consulted on appointment of PSB CEO’s
Prompt Corrective Action  RBI had placed half the PSB’s under lending restrictions imposing Prompt Corrective actions
 PCA forces govt to recapitalize banks before they can lend again
 RBI insists PCA prevented banks from creating more bad loans
Payment Regulator  An Inter-ministerial panel on Payments and Settlement systems Act,2007 suggested creation of a payments
regulator, which would bypass RBI’s power
Board Appointments  Nachiket Mor, who critised govt demand of higher dividend, get his RBI board term cut short without prior info
Dollar window for Oil Co  Govt forced to allow oil companies to borrow overseas after RBI refused a special dispensation to help them
meet their forex needs
Liquidity for NBFC’s  The IL&FS defaults led to liquidity crisis for finance companies
 This threatened to spill over to markets
 In a similar crisis in 2008, RBI enabled purchase of NBFC assets through a special purpose vechile
 Govt wanted to replicate this facility which is opposed by RBI, as a results it had to fall back on PSBs to buy
assets.
Reserves  Govt has an eye on surplus reserve with RBI, arguing that most other central banks are not sitting on this kind of
cash pile
 RBI said it is an important tool to manage exchange rate risks.
https://www.livemint.com/Money/1Aaq1Gei2ByEBLMnU6amEK/The-real-reason-behind-RBI-Govt-spat-over-PCA-framework.html
Source : ETnow