Ahead of next week's crucial board meeting of Reserve Bank of India (RBI), former governor C Rangarajan on Friday called for a spirit of accommodation between the central bank and the government with respect to easing of prompt corrective action (PCA) norms, cutting size of reserves and enhancing credit to MSMEs.
The RBI's central board, headed by governor Urjit Patel, is scheduled to meet in Mumbai on November 19, amid reported rift between the government and the central bank over certain key issues.
Batting for concurrent powers for both the board and the governor, former RBI governor said the central bank's functions have changed over the years and asked not to make a ‘fuss’ about section 7 as its use will send out the wrong signal.
In an exclusive interview to CNBC-TV18, Rangarajan said the central bank should take in to account the sense of the board and act accordingly and the governor should consider the board's views.
Rangarajan also said the RBI governor and the board should have mutual respect, adding that it's the responsibility of the central bank to fix capital rules for banks.Also Read: Former RBI Governor C Rangarajan asks government and RBI to uphold the spirit of accommodation