Here are three contentious issues between RBI and government

RBI Board Meeting Live News Updates: Central Bank, Govt Likely to Find Common Ground on Key Issues

In a series of tweets, the former finance minister also claimed that the government and the Reserve Bank of India (RBI) was heading towards a "confrontation" in the Monday's board meeting of the bank. The Central government was seeking Rs 3.6 lakh crore from the Urjit Patel-led RBI, however, the Finance Ministry officials have denied these reports.

Amid growing tensions with the central bank, the Finance Ministry had sought discussions under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor. Either way, there is considerable nervousness in policy circles as well as the markets, both in India and overseas, as to how the curtain comes down on this unprecedented confrontation between RBI and the union government.

The RBI may also climb down from its position of stringent norms for the PCA framework for banks.

In fact, it was Acharya's speech that marked the turning point in a simmering dispute between RBI and the Union government, which has been particularly incensed over the last few months about what it believes are lapses in regulatory oversight of the financial sector: first, in not capturing the Punjab National Bank fraud and second, missing the crisis building up at Infrastructure Leasing and Financial Services Ltd (IL&FS), which in turn is threatening to cascade into a wider crisis at non-banking financial companies (NBFCs).


Prompt Corrective Action (PCA) framework: Eleven public and one private bank in the country have been placed under what is called a PCA framework - rules the RBI puts in place for weaker banks - that bars lending, among other things, by these banks until they strengthen their capital base. However, the central bank has been averse to the government's demand as it considers the sectors to be vulnerable. "Most central banks don't have reserves of this kind at all, only RBI has these kinds of reserves", he said on 15 November in an address at the Vivekananda International Foundation. The government feels that the MSME sector - which employs about 12 crore people and plays a critical role in the economy - needs some support after being impacted by demonetisation and implementation of the Goods and Services Tax (GST). The RBI and the Centre are at loggerheads over various issues but the bone of contention between the two is reserves that the RBI holds.

RBI's total reserves stand at Rs 9.59 lakh crore. "Lot of misinformed speculation is going around in media".

"There is no proposal to ask RBI to transfer Rs 3.6 lakh crore or Rs 1 lakh crore, as speculated", Economic Affairs Secretary Subhash Chandra Garg had tweeted. "The government has actually foregone (Rs) 70,000 crore of budgeted market borrowing this year". "And what is even more disturbing is that they perhaps want to use the money in order to give out freebies before the 2019 elections", alleged Congress leader Manish Tewari.

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