BJP leader Jaynarayan Vyas defends tweet on new RBI governor Shaktikanta Das

BJP leader Jaynarayan Vyas defends tweet on new RBI governor Shaktikanta Das

Easing lending restrictions on some of the nation's weakest state-run banks will also be discussed.

The RBI, however, was not in favour of any relaxation with its deputy governor Viral Acharya recently defending the PCA framework saying that the banks would have incurred even higher losses and required even more of taxpayer money for recapitalisation. The board at the November 19 meeting had agreed to set up a committee to determine the appropriate levels of reserves the central bank ought to hold.

Market participants are hopeful that the new governor will be more communicative and sympathetic to their concerns. He also underlined the need to ensure that we have to develop a transparent and corruption-free system that can fast-track the decision-making process and a system in which key government decisions should be binding on every institution. "Personal frictions between the main actors - now that doesn't exist". He backed the new governor's conciliatory approach to the government.

In the previous board meeting, held on November 19, the board had chose to constitute a committee of experts to fix the appropriate level of economic capital framework (ECF) that the central bank should hold at any given time and the membership and terms of reference of which will be jointly determined by government and RBI. Bankers said the one-day default rule introduced by way of the February 12 circular of RBI had been discussed threadbare.

Arun Jaitley, India's Minister of Finance and Corporate Affairs, acknowledged Patel's departure.

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Gadkari, who handles many key infra ministries, wondered if government is held responsible for the economic situation, then how can RBI work autonomously.

The central bank has so far kept a tight leash on liquidity, restricted some weak banks from lending and refused to bailout the shadow banking sector. Gross domestic product growth in the three months to September slowed to 7.1 percent from the 8.2 percent pace seen in the previous quarter.

This is the first board meet chaired by the newly- appointed Shaktikanta Das, who took over as the 25th governor on Wednesday. Das's comments stoked a rally in sovereign bonds, which extended gains for a third day Thursday on speculation the RBI will shift to a neutral policy stance from the current hawkish bias. "We haven't destroyed it (RBI as an institution) in any way", he told the media.

While that might provide short term relief to investors, the chief worry remains: how much ground will the RBI cede?

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