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The government sought to define the nature of its relationship with the Reserve Bank of India — currently at a low ebb — by declaring that it respected the regulator’s autonomy but that this independence was subject to provisions of the RBI Act. This meant that it will continue to raise issues of public interest and the economy with the central bank, the government insisted.  The statement came on the day ET reported that the government had invoked powers never used before under the RBI Act to issue directions to the central bank. The press release helped calm the market but didn’t appear to suggest a de-escalation in hostilities between the government and the central bank. “The autonomy for the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement,” the government said, amid speculation about governor Urjit Patel resigning. “Governments in India have nurtured and respected this.”  The government and RBI have to be guided by “public

Section 7 (1) of the Reserve Bank of India Act became a contentious issue after the tension between the central bank and government turned into a public spat over the last few days. No government has so far invoked this section in the central bank’s 83-year history.  According to Section 7 (1), “the central government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest.” The issue of invoking Section 7 (1) came up during the hearing of Allahabad high court in a case filed by the Independent Power Producers Association of India challenging RBI’s 12 February circular. The high court, in August, said the government could issue directions to RBI under Section 7 of RBI Act.  Against this backdrop, the government issued a letter to the RBI governor seeking his views on exemption for power companies in relation to the 12 February circular. The second instance was when the government o

The Reserve Bank of India governor should work in sync with the nation's government to support economic growth or he should resign, said the head of the economic wing of Hindu nationalist group Rashtriya Swayamsevak Sangh, which is the fountainhead of Prime Minister Narendra Modi's ruling party.  RBI Governor Urjit Patel should also "restrain his officials from making differences public," said the RSS official, Ashwani Mahajan, in an interview on Wednesday. "If he doesn't follow discipline it would be better for him to resign," he added. Modi's Bharatiya Janata Party (BJP) emerged from the RSS and its members work to get BJP candidates elected. Mahajan is chief of the RSS's Swadeshi Jagran Manch (SJM) economic group.  Earlier in the day, some local TV channels reported that Patel could consider resigning from his post given a breakdown in relations with the government, sparking a sell-off in the rupee and bonds.  Tensions between the RBI and

After a high-pitched spat over last week, the Reserve Bank of India (RBI) and the government on Wednesday seemed to agree to continue discussions to resolve their recent disagreements — in “public interest”.  Speculation was rife on RBI Governor Urjit Patel’s imminent resignation on Wednesday morning. But by afternoon, he had called a board meeting on November 19 to continue discussions. The finance ministry also issued a statement, saying the central bank and the government “have to be guided by public interest and the requirements of the Indian economy”. “The autonomy for the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement. Governments in India have nurtured and respected this,” the finance ministry’s statement said.  The government and the central bank had disagreed on several issues such as dividend transfer, capital adequacy norms, and liquidity needs of non-banking financial companies (NBFCs).  The RBI for now is focused

The Reserve Bank of India may consider relaxing its prompt corrective action (PCA) framework for loss-making banks, marking a significant shift in its stance, said a senior government official.  Banks under PCA face several restrictions, including on lending, till they are nursed back to health. The government has said that credit disbursement has suffered as a number of banks are under PCA.  However, the government expects some lenders to come out of the PCA framework on their own after recent recoveries made through the bankruptcy process, said the official, who did not wish to be identified. At present, there are 11 banks under the PCA framework and the minimum common equity Tier I ratio as prescribed by RBI stands at 5.5% against 4.5% under Basel III norms.  “These issues were discussed in the RBI’s board meeting,” said the official.  Bank credit was up 12.5% on September 28 from a year ago.  The RBI stoutly defended the PCA framework in the past. Earlier this month RBI’s deput

The government has extended the last day for filing GSTR-3B returns to October 25 in the backdrop of apprehensions over availing input tax credits for July 2017-March 2018.  “In view of the said apprehensions and with a view to give some more time to the trade and industry, the last date for furnishing return in the form GSTR-3B for the month of September 2018 is being extended up to October 25, 2018,” the Central Board of Indirect Taxes and Customs said in a post on Twitter on Sunday. The original deadline was October 20. Industry has been worried about losing hundreds of crores of rupees in input tax credits due to mismatches in tax payment or reporting by their suppliers, who have time till October 31 to file their GSTR 1.  Tax experts said the extension doesn’t really help much because most companies would have filed their returns by October 20.  “Since there is no facility for amendment of the return, the companies cannot claim the credit which they might have missed. To provi

Policy watchers surprised by the Reserve Bank of India’s (RBI) decision to hold rates in October against a widely expected hike are fairly certain that this interlude will be over as soon as December.  They are probably right.  The minutes of the October policy meet show that the central bank’s rate-setting committee members did not tone down their hawkishness or reduce their vigil on inflation when they had recommended a pause.  In fact, long-standing hawk and RBI executive director Michael Patra said monetary policy needs to be on “high alert” on inflation. He merely felt that the need to raise rates was less because the past two rate hikes still haven’t reached all corners of the economy. Chetan Ghate, who voted for a hike, felt that the sharp depreciation.  The members of the monetary policy committee flagged off several risks to inflation even as the headline number softened for three consecutive months. 3.28 the exchange rate and rise in oil prices would unhinge inflationary