Notes Ban Impact Was "Transient", RBI Governor Tells Lawmakers: Sources

Robust credit growth of 15% this fiscal, says Urjit Patel He did not talk about relaxing of credit norms for any sector RBI Governor did not mention anything about Section 7 of RBI Act

NDTV Profit Team

28 Nov 2018, 09:28 AM IST

The RBI governor faced many questions related to the feud with the government.

The impact of notes ban on the economy was "transient", Urjit Patel told the Standing Committee on Finance.
The RBI chief informed the Committee of 31 MPs that a robust credit growth of 15 per cent has been registered this fiscal year, sources said.
Mr Patel did not talk about relaxing of credit norms for any sector.
The state of the economy, RBI reforms, resolution of stressed assets of public sector banks, appraisal of implementation of the Insolvency and Bankruptcy Code, and the ban on Rs 500 and Rs 1,000 currency notes in November 2016, were listed on the agenda of the committee.
The RBI governor faced many questions related to the feud with the government, the proposal to reform the functioning of the RBI - which the central bank fears will impact its autonomy - and the proposal to share RBI's reserves with the government.
The RBI Governor did not mention anything about Section 7 of the RBI Act. Earlier, there were reports that the government had invoked Section 7 of the RBI Act to direct the top bank in matters of public interest. According to Section 7 of the RBI Act, the central government is empowered to issue directions it considers necessary for public interest to the central bank.
The government and the RBI have been at loggerheads over issues including the transfer of surplus funds, easing of bad-loan rules and providing liquidity to the shadow-banking sector. A marathon board meeting last week, which brought the RBI chief face-to-face with government nominees, was seen to end on a conciliatory note after the central bank ceded some of the demands of the government, including agreeing to set up a panel on sharing of surplus reserves with the government.
On Tuesday, however, Mr Patel avoided making a comment on issues related to RBI's autonomy or the possibility of giving a part of surplus reserves to the government. In the board meeting, the central bank had also reportedly agreed to restructure loans of small businesses up to Rs. 25 crore.
On Monday, media reported Economic Secretary Subhash Chandra Garg as saying that the government wants to discuss changes to the RBI's governance structure at a board meeting next month.
The rift between the RBI and the government came out in public domain after deputy governor Viral Acharya, citing an example of the Argentinian crisis of 2010, criticized the government for interfering in the top lender's decision-making process and thereby undermining its autonomy. There have been allegations that the government, keen on boosting the economy ahead of central elections in 2019, had asked the RBI to provide some of its surplus reserves. The Congress had said the amount could hover around Rs. 1 lakh crore.