It’s time to bury the hatchet and work together: that is evidently what the government unreservedly indicated to the Reserve Bank of India on Tuesday. This unifying message was conveyed when Finance Minister Arun Jaitley and RBI Governor Urjit Patel met for the first time after the recent public confrontation between North Block and Mint Street .
The occasion was the 19th meeting of the Financial Stability and Development Council (FSDC) at the North Block on Tuesday. A little before 12 noon on Tuesday, a smiling Patel arrived at the Finance Ministry in North Block along with his four Deputy Governors, acknowledging mediapersons’ greetings. However, neither he nor Deputy Governor Viral Acharya responded to questions on the controversy that erupted following Acharya’s October 26 speech on preserving the RBI’s autonomy.
According to sources, the government is not happy with Acharya’s speech. The RBI has been pushing for more powers to clean up the banking system, which is saddled with bad debts. In his speech, Acharya defended the central bank’s independence, saying its autonomy would be strengthened by having regulatory control over state-run banks.
Meanwhile, sources made it clear that both Patel and Acharya will continue to hold their posts. Patel was appointed in 2016 for a three-year tenure, which could be extended by two years. Acharya was appointed on January 20, 2017 for three years.
Asked why all four Deputy Governors had come for the FSDC meeting, which is normally attended by one DG, a senior government official said that since the meeting had a long agenda covering various aspects, “it was proper for all four to come. It should not be interpreted otherwise.”
After the meeting ended, Patel did not have a one-to-one meeting with the Finance Minister or Secretaries. He exited through another gate to avoid the waiting media.
The meeting, chaired by Jaitley, discussed liquidity issues being faced by non-banking financial companies. According to officials, Patel told the meeting that the liquidity problem in NBFCs is not as severe as is being projected, but assured the government that the RBI would ensure adequate liquidity. He, however, said that some sectors might be facing problems. The government, on its part, asked the RBI to prevent the spreading of contagion from the troubled IL&FS to other sectors of the economy, officials added. Pension fund regulator PFRDA Chairman Hemant Contractor said there was a general discussion on the domestic and the global economy.