NEW DELHI: The government expects the Reserve Bank of India (RBI) to announce more measures in the days ahead to address liquidity issues faced by non-banking finance companies (NBFCs) if there’s a need for this, said a person familiar with the matter.

The robust discussion on various issues at Monday’s RBI central board meeting was seen as settling the debate on the central bank’s autonomy and clearly establishing the government as a stakeholder in policy making.

“The Centre feels that liquidity is the main issue and autonomy is the bogey. RBI seems to have climbed down a bit from its earlier position,” said the person cited above. Another person familiar with the deliberations characterised the meeting as positive and forward looking.

The meeting, according to the first person, remained largely cordial though deputy governor Viral Acharya expressed reservations on some of the key issues raised by the government’s nominees.

Industry Members Back Govt 
The government’s wish list included liquidity support to head off any credit freeze risk, a relaxation in capital requirements for lenders, easing the prompt corrective action (PCA) rules for weak banks and support for micro, small and medium enterprises (MSMEs). The government found strong support from the industry members on the 18-member board, said this person.

They backed the finance ministry on the need for liquidity and resolving the credit squeeze faced by some sectors. This support from industry members and other directors facilitated decisions on the issues raised, said the person. Debate on the governance structure of the RBI and the role of its central board will be taken up later, said the person. The government is expected to continue with its policy of engaging with the RBI on issues impacting the economy through the board.

The government had sought a special liquidity window for NBFCs, arguing that credit disbursal to vital sectors such as real estate and small and medium enterprises (SMEs) had stalled as lenders tried to conserve capital in order to avoid the possibility of default. While the central bank may not open a liquidity tap, it could announce more measures if credit disbursal does not pick up, regarded as critical for growth and employment generation.

“They will consider more measures if need be,” said the person, adding that the finance ministry will continue discussions on the issue.

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