RBI board meeting: 4 public sector banks may see lifting of lending curbs

New Delhi: The Reserve Bank of India (RBI) believes that four out of the 11 state-controlled banks facing lending curbs could come out of the prompt corrective action (PCA) watchlist with some capital infusion. This was hinted at the banking regulator’s board meeting on Friday, says a Times of India report.

It is worth noting that the PCA framework was one of the sore points between the finance ministry and RBI governor Urjit Patel, who announced his sudden decision to step down on Monday, nearly nine months before his three-year term was to come to an end. The central bank board met on December 14 under the stewardship of new governor Shaktikanta Das has decided to further look into the governance framework of the RBI.

In the crucial meeting, Das is believed to have said that he will hold talks with the government representatives on the issue of “economic capital framework” (ECF) and on governance. Economic affairs secretary S C Garg and department of financial services secretary Rajiv Kumar are in the apex bank board as the government representatives. Das will also hold discussion with the central bank’s internal team on the liquidity needs, the report mentioned.

Worth mentioning here is that a day ahead of the board meeting, the RBI chief met the heads of seven public sector banks, raising hopes of easing the PCA norms for weak banks. The banking regulator has barred 11 public sector banks from lending under the PCA plan for their deteriorating financial health until they improve their capital ratios, cut bad loans and become profitable.

“The board deliberated on the governance framework of the Reserve Bank and it was decided that the matter required further examination,” the central bank said in a statement after the meeting.

The next RBI board meeting is likely to be held in mid-January, 2019. Prior to that, the central bank’s board for financial supervision will assess the progress by state-run banks that have been placed under PCA, the report said.

Many banking analysts say Friday’s meeting ended in less than four hours, compared with the earlier two meetings that lasted nine hours, shows that the central bank and the finance ministry are on the same page under new RBI boss Shaktikanta Das.