RBI board meeting: Central bank agrees to improve liquidity for financial sector, increase credit to MSMEs
The government has been pressuring the RBI to reduce capital ratios for banks to speed up loans to small businesses, a key vote bank for Modi
The board of the Reserve Bank of India (RBI) on Monday agreed to ease liquidity for the financial sector and increase credit to small businesses, two sources present at the meeting said.
The move comes in response to pressure from Prime Minister Narendra Modi’s government which faces a general election by next May and is concerned that low farm prices and difficulties small businesses face in borrowing, may hurt its prospects with voters.
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Some more contentious issues were kicked down the road to be discussed by newly formed committees, the sources said.
The government has been pressuring the RBI to reduce capital ratios for banks to speed up loans to small businesses, a key vote bank for Modi. There are five key state elections in the next few weeks and a general election due by May.
“The meeting happened in a very cordial environment. Most of the issues were resolved in an amicable manner,” a board member, who attended the meeting, told Reuters.
“A panel will be formed to work out a framework to determine the reserves requirements of the RBI and transfer surplus funds to the government,” the board member said.
A litany of demands from top finance ministry officials prompted warnings from RBI Deputy Governor Viral Acharya last month that undermining central bank independence could be “catastrophic,” triggering a public feud between the bank and the government.
Last year, the Centre had set a target of 10% ethanol blending in petrol by 2022 and 20% by 2030. Ethanol is less polluting and also provides farmers with an alternate income source
Apart from Sibal, G-23 leaders Shashi Tharoor and M Veerappa Moily have also slammed Prasada for switching to the BJP
Maharashtra deputy chief minister and senior NCP leader Ajit Pawar and senior Congress leader Ashok Chavan also accompanied Thackeray during the meeting with the prime minister