Govt to continue pressing RBI for relaxing norms, funds

Keeping up the heat on the RBI, the government will continue to press the central bank to relax norms to boost lending and transfer at least a third of its Rs 9.6 lakh crore reserve, sources familiar with the discussions said.

In recent weeks, the rift between the RBI and the government has been widening over various issues.

Recently, the government cited never-used before provisions of law that gives it powers to issue directions to the RBI on mattes of public interest to resolve certain issues.

Citing Section 7 of the RBI Act -- an unprecedented move in the 80-year history of RBI -- the government wants RBI Governor Urjit Patel to address three prime concerns. They pertain to transfer of surplus funds, easing of NPA norms to kick start lending and support growth, and easing liquidity crisis facing non-banking finance companies (NBFCs), sources had said.

These issues may figure during the RBI's board meeting on November 19.

According to the sources, the government would continue to press the RBI to relax norms to boost lending and transfer at least a third of its Rs 9.6 lakh crore reserve.

The government wants the RBI to part with most of its profit as dividend. The central bank, however, feels that it needs to retain a share of profits to make its balance sheet stronger, as per media reports.

The government wants Rs 3.6 lakh crore of surplus to be transferred to it, the reports said.

In its attempt to clean up the banking system, the RBI introduced Prompt Corrective Action (PCA) framework that places curbs on lending, expanding branch network and dividend distribution on weak banks.

It has also mandated banks to declare a delinquent borrower even if payments were overdue by a day.

The government wants some of these strictures to be eased to kick start lending and support growth, the sources said.

(Agencies)