A security guard stands at the gate of the Reserve Bank of India headquarters in New Delhi. (Photographer: Anindito Mukherjee/Bloomberg)

RBI Calls Next Board Meet On Nov. 19 Amid Tensions With Finance Ministry

The Reserve Bank of India has called for the next meeting of the central board on Nov. 19, three people familiar with the matter told BloombergQuint on condition of anonymity. The suggestion of the next date of the board meet went out on Wednesday, people cited above confirmed. This, even as government officials maintained that the issues between the RBI and the government must be seen in ‘larger public interest.’

Earlier in the day, the government had issued a statement in light of the public spat that has broken out between the RBI and the Finance Ministry. “The autonomy for the Central Bank, within the framework of the RBI Act, is an essential and accepted governance requirement,” said the government in its statement. “ Both the Government and the Central Bank, in their functioning, have to be guided by public interest and the requirements of the Indian economy,” the statement said.

The RBI’s board meeting call came within hours of that statement being put out and could be seen as a sign of easing tensions between the two sides, although there is no formal indicator of a consensus emerging on any of the contentious issues.

A government official, speaking on condition of anonymity, said that the current issues are ‘about substance and not protocol’. This official added that some of the important issues have not even come out in public. These issues need to be looked at in the larger public interest, the official said.

The next board meet will take place against this backdrop.

The meet is intended to take forward the discussions that were on the agenda at the last board meet held on October 23, said one of the three people cited earlier. The discussion agenda could not be completed last time due to paucity of time, this person said.

Since the last meeting, differences brewing between the RBI and the government have come out into the open.

RBI Calls Next Board Meet On Nov. 19 Amid Tensions With Finance Ministry

On Friday, RBI deputy governor Viral Acharya cited some of the issues where the central bank and the government have differing views. The hard-hitting speech highlighted the importance of ensuring that the central bank’s independence isn't compromised. Issues of dispute between the RBI and the government range from banking regulation to payment systems and the central bank balancesheet. Neither the government nor the RBI has signaled a consensus emerging from any of these specific issues yet.

The differences between the government and the RBI came up even at a meeting of the Financial Stability and Development Council on Tuesday. While the government was of the view that more needs to be done to support the NBFC sector amid tight liquidity conditions, the RBI felt that liquidity was comfortable.

On Wednesday morning, BloombergQuint reported that the government had written to the RBI seeking consultation under Section 7 of the RBI Act. This section, which allows the government to issue directions to the RBI after consultation with the governor, has never been invoked before.

The government’s decision to issue a statement came after that news was reported across several media agencies. The RBI’s decision to call the next board meeting followed by the evening. To be sure, there is no official indication that the decision to call a board meeting for Nov. 19 is linked to the government’s statement in any way.

Also read: RBI-Government Tensions: Did The Finance Ministry Statement Do Enough To Calm Nerves?