The government has proposed “drastic changes” in the rules framed to retune the composition of three committees of the RBI: Board for Financial Supervision, the Board for Payment and Settlement Systems and the Committee of the Central Board.
The central government will press the Reserve Bank of India (RBI) to restructure its key committees in a way that more central board members are a part the decision-making process of the bank that is set to meet on December 14.
Sources said the government had moved a proposal titled ‘governance in RBI’ at least six months back as it was upset over being kept in the dark on the new norms for resolution of stressed assets set by the central bank in February, popularly known as the February 12 circular.
According to sources, the government has proposed “drastic changes” in the rules framed to retune the composition of three committees of the RBI: Board for Financial Supervision (BFS), the Board for Payment and Settlement Systems (BPSS) and the Committee of the Central Board (CCB).
All the three committees are chaired by RBI Governor Urjit Patel.
The BFS, which deals with consolidated supervision of the financial sector, meets once a month normally and is going to meet on December 6 to consider the government’s demand for bringing some banks out of the Prompt Corrective Action (PCA).
The RBI governor, all deputy governors and four directors nominated by the governor, are part of the BFS.
Three members are sufficient to form a quorum for the meeting, according to the regulations.
The government wants more independent directors in forums, including the BFS, and may also push for increasing the quorum in case of all the CCB and the BFS, sources said.
“The government has made suggestions based on internationally accepted practices, citing the example of the United States and Germany.
"The committees assisting the central bank are dominated by the RBI brass at present,” an official said.
The rules - RBI General Regulations, 1949 and RBI (Board for Financial Supervision) Regulations, 1994 - were framed by the central board of the RBI.
“The one who delegates (referring to the central board) also has the power to review the regulations,” the official added, indicating the board may pass a resolution to alter the governance norms of the RBI in the forthcoming meeting.
The RBI has, however, also circulated a note on the same subject suggesting minor tweaks in the regulations, as against the “drastic” changes proposed by the government, a central board member said, requesting anonymity.
Photograph: Vivek Prakash/Reuters