RBI Governor Current Affairs - 2020

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Bimal Jalan led panel defers report on RBI surplus funds

The Reserve Bank of India (RBI) committee led by Bimal Jalan (former RBI governor) constituted for considering guidelines for transfer of central bank’s surplus funds to government delayed submitting its report after lack of consensus among its members. The panel was originally supposed to submit its report in April 2019.

Background

The RBI committee was appointed in December 2018 to review Economic Capital Framework (ECF) for central bank after then Union Ministry of Finance under Arun Jaitely advised RBI to transfer surplus funds to central government.

Arguments by Finance Ministry:  The finance ministry was of view that the buffer of 28% of gross assets maintained by RBI bank is well above global norm of about 14%. Thus, RBI board in its meeting held on 19 November 2018, decided to constitute a panel to examine Economic Capital Framework (ECF).

This led to loggerheads between government and RBI under its previous governor Urjit Patel (who later resigned) over Rs.9.6 lakh crore surplus capital that central bank keeps with itself.

About ECF Panel

Members: The six member committee headed by Bimal Jalan includes- Rakesh Mohan (former deputy governor of RBI) as vice-chairman, Subhash Chandra Garg (finance secretary), N S Vishwanathan (RBI deputy governor), and lastly RBI central board members Sudhir Mankad and Bharat Doshi.

Objective: The panel was entrusted to review best practices followed by central banks throughout the world in making assessment and provisions for risks.

Timeline: The ECF panel was required to submit its report to RBI within 90 days of its first meeting. The 1st meeting of ECF took place on 8 January 2019 following which the panel was given a 3 month extension.

Way Forward

The Bimal Jalan led panel will now meet one more time before submitting its report by end of June 2019 and the delay in finalising report which may be over difference of opinion will also be discussed.

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RBI to create a ‘Specialised Supervisory and Regulatory Cadre’

The Reserve Bank of India’s (RBI’s) Central Board has decided to create a ‘Specialised Supervisory and Regulatory Cadre’ within the RBI.

Key Highlights

About: The decision to create a Specialised Supervisory and Regulatory Cadre within the RBI was taken at the recent two-day meeting of Reserve Bank of India’s (RBI’s) Central Board which was held under the chairmanship of RBI Governor Shaktikanta Das in Chennai. This was the boards 576th Meeting.

Objective: The cadre creation came with a view of strengthening the supervision and regulation of commercial banks, urban cooperative banks and Non-Banking Financial Companies (NBFCs).

Importance: The decision for creating an additional oversight mechanism was taken in the wake of recent NBFC crisis such as large-scale defaults by IL&FS in 2018 (which caused on-going liquidity crunch in banking system), failures by credit rating agencies to flag risks, alleged lapses by auditors and divergence in asset quality by big banks. Thus the supervision cadre would supplement RBI to be better equipped in picking up early warning signs.

Key Discussions at RBI’s Central Board Meeting

  • It reviewed the current economic situation, global and domestic challenges and various areas of operations of RBI.
  • It reviewed the present structure of supervision in RBI in light of growing complexities, diversity and interconnections within the Indian financial sector.
  • It also discussed issues related to currency management and Banker to Government functions of the RBI.
  • It also discussed the Medium Term Strategy document, which covers RBI’s Mission and Vision Statements.

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