RBI board meet: Experts don’t see much drama

The much-awaited board meeting of the Reserve Bank of India (RBI) on November 19 is unlikely to witness any high drama as speculated by many.

According to multiple people and experts in the banking and finance industry who are keenly watching the developments, RBI Governor Urjit Patel may not resign on Monday.

Earlier, last week, the government sought change in rules to seek closer supervision of RBI in an effort to gain control over the banking regulator.

“I don’t think that Patel will take any drastic measure such as resigning at the board meeting on Monday. There is a lot of expectation over the drama on the upcoming RBI meet, but honestly, there is not going to be such a thing,” head of a mutual fund company, seen close to Finance Ministry, told DH.

The MF chief added that the government, by creating brouhaha over Section 7, wanted to “convey a message to RBI”.

According to the sources, the government is upset at the RBI’s way of dealing with the issues of bad loans, which it thinks is hampering credit flow to Small and Medium Enterprises (SMEs). Sources also suggest that the government is eyeing RBI reserves for populist measures, as elections are around the corner. Although DEA Secretary rejected any such development stating, “The only proposal under discussion is to fix appropriate economic capital framework of RBI.”

A chief economist with a global advisory firm said, “What I understand is that even the government wouldn’t want Urjit out of RBI at this juncture, when the General Elections are fast approaching".

RBI insiders echoed similar views. “He has not conveyed anything to us, but then we don’t see him going. However, the fear within the RBI is that after the meeting with Prime Minister, the governor might change his stance in the board meeting and reach a compromise,” a senior RBI official told DH, on condition of anonymity.

Many others see the axe falling on the RBI deputy governor Viral Acharya. “What I see is that they might tell Acharya to go. Not immediately, but in the long run,” a former finance minister said.