Published on: December 12, 2018 1:57 PM
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The government on 11 Dec appointed Shaktikanta Das, member of the fifteenth finance commission, as the governor of the Reserve Bank of India (RBI).
A day before pervious governor Urjit Patel resigned on 10 Dec over the alleged tussle between government and RBI’s independence.
Who is Shaktikanta Das?
He was a former secretary at the department of economic affairs. He retired as the Economic Affairs Secretary in May 2017.
He is a 1980 batch IAS officer from Tamil Nadu cadre.
RBI and Government: Challenges
The spat began with the government unhappy with the inflation-focused RBI for not cutting interest rates – and even raising them. However, it spilled over into regulation, something the central bank believes is its exclusive domain.
RBI’s February 12 circular on classification of non-performing assets (NPAs) and norms of loan restructuring was the next flashpoint. The government saw it as overly harsh, and indeed it drove all but two state-run lenders into the red.
The government has been insisting that RBI step in to provide relief to non-banking finance companies (NBFCs), which are grappling with a cash crunch after IL&FS defaulted on repayments.
The government wants the RBI to exempt power companies under the prompt corrective action or PCA framework, which outlines triggers for declaring a loan account as stressed or non-performing asset (NPA).
The RBI uses the PCA framework -- based on three parameters -- as an early-warning tool to check danger signs in the health of lenders. The PCA framework is applicable only to commercial banks.
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