INSUBCONTINENT EXCLUSIVE:
The government and the RBI have been sparring over how much capital the central bank needsThe Reserve Bank of India signaled a compromise
with the government by agreeing to study a demand for sharing a part of its capital -- an issue that had triggered a public spat between the
monetary policy makers and their political bosses.The central bank will form a panel to consider the funds transfer to the government, it
said in a statement after the board meeting that lasted a little over nine hours
It, however, did not immediately yield to demands for easing lending norms for weak banks while retaining capital buffers for banks at 9
percent."Both the RBI governor and the finance ministry walked the extra mile," Sachin Chaturvedi, a member of the board, said in an
"They were flexible on several issues."The government and the RBI have been sparring over how much capital the central bank needs and how
tough its lending rules should be
For a nation that relies on imported capital to fund investment, the reaching of a middle ground is key to retaining investor confidence in
the world's fastest-growing major economy.India is not alone in witnessing friction between its monetary policy makers and the government
President Donald Trump has repeatedly criticized the Federal Reserve for raising interest rates while President Recep Tayyip Erdogan has
leaned on Turkey's central bank
Most economists argue leaving central banks to do their work free of political influence tends to lead to lower interest rates and
inflation.The rupee advanced and bonds rallied Monday before the meeting concluded, and amid optimism a common ground would be reached
The currency gained 0.4 percent to 71.6575 against the dollar, while the benchmark 10-year bond yield fell 3 basis points to 7.79 percent
One-month offshore non-deliverable rupee forwards rose 0.4 percent as news of the board meeting trickled in.The AgendaThe board discussed
Basel regulatory capital framework, a restructuring program for stressed small businesses, the health of weak banks placed under the
so-called prompt corrective action and the economic capital framework of the RBI, the central bank said.The 18-member board advised the RBI
to consider restructuring of loans of up to Rs 25 crore for small borrowers, it said.Getting the RBI to agree to its demands will help Prime
Minister Narendra Modi's government meet budget goals by using a part of the central bank's reserves
The government also wanted norms for some banks to be relaxed so they can lend easily and keep the economy firing ahead of an election next
An RBI panel will review those norms, according to the statement.The central bank -- led by Governor Urjit Patel -- had pushed back against
some of the moves earlier, keen to burnish its inflation-targeting credentials and clean up one of the world's worst bad-debt piles.That
approach has broadly helped anchor inflation expectations in a country where prices have often risen sharply, eroding investor confidence
and leading to sell-offs in assets
The six-member monetary policy committee has raised interest rates twice this year and its decision has seen headline retail inflation slow
to a 13-month low of 3.3 percent in October.The board will meet again on December 14, Mr Chaturvedi said.
