Mumbai: India’s government wants to discuss changes in the central bank’s governance structure at the Reserve Bank of India’s next board meeting, Economic Secretary Subhash Chandra Garg told ET Now.
Garg, who is a government nominee at the RBI, said the board should discuss whether panels should be set up to oversee some of the bank’s functions. The next meeting is scheduled for December 14.
The proposal may heighten tensions between India’s finance ministry and the central bank, which have been at loggerheads over issues including transfer of surplus funds, easing of bad-loan norms and ensuring liquidity to the shadow-banking sector. There were signs of a truce at last week’s meeting after the RBI agreed to study a demand for sharing a part of its capital, but Garg’s comments highlight that the tensions still exist.
“We should not shy away from discussions or have a fresh look,” Garg told ET Now. He said any changes to the board’s governance structure shouldn’t be construed as an attempt to control the RBI’s powers. Bloomberg News reported earlier this month that the government was proposing changes that will enable closer supervision of the central bank.
The RBI’s board is an advisory body and guides the regulator, leaving decision-making to Governor Urjit Patel and his colleagues.
However, Swaminathan Gurumurthy, a chartered accountant nominated to the board by the government, and nominees like Garg and Rajiv Kumar, have recently been vocal about perceived shortcomings in banking supervision, the flow of credit to industry and easier financial conditions to overcome a crisis in the shadow-banking sector.