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The Reserve Bank of India board meeting on November 19 may decide to set up a high-level committee to decide on its capital framework, among the key reasons for the conflict between the regulator and the Centre, said several people familiar with the matter, downplaying expectations of a showdown.  The possibility of the board giving any direction with regard to the actual transfer of RBI reserves to the government looks remote as the RBI Act does not permit this, they said. “The board can lay down rules but cannot decide on a case-to-case basis,” said former financial services secretary DK Mittal, adding that the rules regarding the quantum of reserves to be held had been decided by the board. “The board has to take a balanced stand now. Both the government and RBI should behave responsibly.” Mittal was a member of the board by virtue of his position. The reserves are meant for unforeseen contingencies, including depreciation in the value of securities, risks arising from exchang

The Securities and Exchange Board of India (Sebi) is considering a proposal to tighten rules for liquid mutual funds holding assets worth ?8 lakh crore or more to curb volatility in flows following the challenges facing finance companies in the wake of the debt default by Infrastructure Leasing & Financial Services (IL&FS).  The capital market regulator is planning a short lock-in period for investments in liquid funds, in which investors — mostly large companies — park idle cash. Sebi may also make it mandatory for liquid funds to mark to market the value of more bonds and allow segregation of debt instruments in mutual fund portfolios that are in trouble, said three people aware of the development. These measures are likely to be discussed at the Sebi-appointed mutual fund advisory committee meeting on Monday.  A lock-in period, aimed at reducing volatility in flows, could reduce the popularity of the product among institutional investors, experts said.  Most banks churn

More than eight years after successfully launching the Aadhaar project, India’s unique identity authority (UIDAI) is looking at effecting a major “operational shift” from enrolment to large-scale data updates in order to ensure the long-term success of the scheme, according to an official note by the authority.  Set up in 2009 through a government notification, UIDAI has been generating the 12-digit unique identity number, called Aadhaar, since 2010.  As on September 30, more than 1.12 billion Aadhaar numbers have been generated. As per UIDAI data, Delhi, Haryana, Himachal Pradesh, Goa, Kerala, Punjab, Chandigarh and Telangana have more than 100% saturation till October 31, while Sikkim has the lowest saturation at 87%. Hundred per cent saturation means the entire population of a city has been covered in terms of Aadhaar enrolment. It exceeds 100% when there is a migrant population availing of the service. “In these states, UIDAI needs to undertake an operational shift from enrolme

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