No Two Joint Winners, But Only One Loser!
BUSINESS ECONOMICS|December 1 - 15, 2018

Though a section of the press declared that the Reserve Bank of India (RBI) and the Government of India (GOI) were joint winners of the much awaited ‘mother of all board meetings’ that was organised on November 19, the undisputed fact remains that the RBI emerged unscathed. It did not lose anything. GOI was the lone loser. The predicted events did not materialise.

Dr. T.K. Jayaraman
No Two Joint Winners, But Only One Loser!

The anticipated results were: (i) GOI proved it was the boss in money matters; (ii) GOI can “gobble up” all the reserves RBI, which were built up by central bank for maintaining its credibility as a monetary authority; and (iii) successfully “watering down” the so called PCA (Prompt Corrective Action) framework put forward by RBI along the strict internationally accepted financial norms for maintaining stability of the financial sector and banking institutions. None of them eventuated. Above all, the earthshaking event anxiously awaited was the resignation of at least one person which was RBI Governor Urjit Patel. It was also forecast that Deputy Governor Acharya would also quit. But the two are still continuing in office. It was a tame ending of a battle.

PCA framework

To deal with the rising non-performing assets of the banks, RBI had introduced PCA measures for 11 public sector banks which are in the red. RBI prevented them from further lending. The measures relate to capital regulatory reforms, which included the minimum common equity Tier (CET) -1 ratio requirement at 5.5% as compared to 4.5% under Basel III framework. There are other requirements as well. They pertain to consumer credit loans and personal credit card loans. They are assigned a maximum of 125% risk weight as compared to 75%. The GOI wanted them to be relaxed, at least in regard to CET -1 ratio to 4.5% , so 6 lakh crore could be made available for overcoming the hurdles to credit flows. The GOI also wanted the capital to risk weighted assets ratio of 9% be reduced to 8% so more funds will be released for more lending.

この記事は BUSINESS ECONOMICS の December 1 - 15, 2018 版に掲載されています。

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この記事は BUSINESS ECONOMICS の December 1 - 15, 2018 版に掲載されています。

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