FM, RBI Governor to come face-to-face at FSDC meet

NEW DELHI: Amid the upheaval in ties between the central bank and the government, Reserve Bank of India governor Urjit Patel will be in the capital on Tuesday to attend a meeting of Financial Stability and Development Council (FSDC).

The governance of public sector banks and the issue of non-performing loans are expected to figure in the discussions at the FSDC, a body of financial sector regulators and the government set up after the global financial crisis for better coordination and oversight, said a government official privy to the development.

The FSDC is chaired by finance minister and this would be Patel and finance minister Arun Jaitely’s first formal interaction after differences between the RBI and the government came to the fore. Other financial sector regulators will also be present.


Regulation of state-owned banks and tackling of NPAs are among the areas of difference between the government and the central bank, with the RBI repeatedly bemoaning the lack of powers to oversee public sector lenders.

The government has maintained that the RBI has adequate powers to regulate both public and private sector lenders. The Banking Regulation Act of 1949 allows the regulator to inspect a bank, its books and its accounts, minister of state for finance Shiv Pratap Shukla had said in the Rajya Sabha.

“The powers of RBI are wideranging and comprehensive to deal with various situations that may emerge in all banks, including public sector banks,” Shukla said in response to a question on whether the RBI has adequate powers to regulate public sector banks. The central bank had said after the Punjab National Bank fraud earlier this year that state-owned banks are not completely regulated by the RBI.

The FSDC will also discuss cybersecurity issues in the banking system, crypto-currencies and the proposals of the Sumit Bose Committee on measures to curb misselling of financial products and rationalising distribution incentives. Besides, the council will take stock of macroeconomic stability. Developments such as the increase in US interest rates and its impact on emerging economies and pressure on the current account in the wake of higher global crude oil prices could also figure in the discussions.