The central board of the Reserve Bank of India (RBI) under new Governor Shaktikanta Das will meet on Friday where the directors are likely to push for a greater say in the decision making of the central bank.
The meeting will review the progress with respect to some of the decisions taken in the last meet on November 19. Among other things, the crucial board meeting is expected to take a stock of Micro, Small & Medium Enterprises (MSMEs), which is under stress due to demonetisation and implementation of the Goods and Services Tax (GST). It is expected that relaxation of the Prompt Corrective Action (PCA) framework for weak banks would also come up for the discussion under the new the governor.
This scheduled meeting comes in the backdrop of surprise resignation by Urjit Patel earlier this week citing personal reasons. However, the tussle between the finance ministry and RBI was attributed as a reason for the sudden exit of Patel, who would have completed his three-year term in September 2019.
CNBC-TV18 caught up with Janmejaya Sinha, chairman - India, Boston Consulting Group, VG Kannan, chief executive of IBA and RK Bakshi, former executive director, Bank of Baroda, to discuss what should expect from the meeting.
Janmejaya Sinha said every board, every organisation has to be accountable.
"Every board in the world has to ensure a set of things and they need to have a discussion and then the management has to go and execute those things because the board cannot execute those things," he said.
On PCA norms VG Kannan said as of now they have been directed that they should reduce the risky assets.
"Therefore, in the SME or for that matter corporate assets, they cannot take up anything other than AAA or AA," Kannan said.
"Some banks like Dena Bank and a couple of banks have been told not to lend at all. So there could be some relaxation saying that you can lend to retail or small scale industries of a particular size," he said.
They could be given some relaxation so that they can at least increase their balance sheet size and earn something rather than putting everything into G-Sec which is safe, of course, but at the same time does not give you the necessary yield, he said.
RK Bakshi said the PCA yardsticks are not incorrect or bad but let us reconcile to the fact that two years of losses at the net level do not mean that there are operating losses also.
"I am not saying for a moment that the lending restrictions should be relaxed. That is not the point right now. But the point is to put things in perspective. If banks are not expanding their books - suppose it cannot lend to anybody below A, we have got too many A-rated clients in the country who will flock to these banks and who do not have other bankers who are already dealing with them," he said.
Given a choice a higher rated customer will like to deal with a bank which is not in PCA which has got adequate capital and which can help them to a larger extent, Bakshi added.