RBI board discusses NPA crisis, liquidity crunch

MUMBAI: The Reserve Bank board, including Governor Urjit Patel, economic affairs secretary SC Garg and financial services secretary Rajiv Kumar met here Tuesday to discuss the issues plaguing the banking sector.

It is learnt that the 18-member board discussed the prompt corrective action (PCA) framework under which as many as 11 public sector banks are placed now. The meeting is also understood to have discussed the liquidity crisis faced by nonbanking finance companies following the crisis at project financier IL&FS group, which was taken over by the government on October 1 following a string of payment defaults. All the four deputy governors — N S Vishwanathan, Viral Acharya, BP Kanungo, Mahesh Kumar Jain — also attended the meeting, an RBI source said. The two new members — S Gurumurthy and SK Marathe — who were inducted in August also attended the meeting, the central bank source said. Meanwhile, the RBI board is likely to meet again in the first week of November, the source said. The meeting assumes importance as it comes within a week of the central bank openly dissenting with the government on the question of a separate regulator for payments system. In a rare move, on October 19, RBI had made public a stronglyworded dissent note on certain recommendations of a government panel on changes to payment and settlement laws and said the regulation of payments system should remain with the central bank. The interministerial committee set up by government under the chairmanship of the economic affairs secretary to finalise amendments to the Payment and Settlement Systems Act of 2007 in its draft report had suggested creating an independent regulator Payments Regulatory Board to deal with payments related issues.