Mumbai: The crucial central board meeting of the Reserve Bank of India is underway to discuss contentious issues including a new economic capital framework (ECF) for the central bank and relaxation in the prompt corrective action norms for at least some of 12 state-run banks. (Also read: Shaktikanta Das to Chair His First RBI Board Meeting Today; Central Board Role to be Discussed)

This scheduled meeting comes in the backdrop of the sudden resignation by Urjit Patel earlier this week citing personal reasons. Sources said one of the key agendas for the board meeting will be governance issue _ the role of the central board in the decision-making of the RBI.

This is the first board meet chaired by the newly- appointed Shaktikanta Das, who took over as the 25th governor on Wednesday.

With a new Governor in the saddle, the Government may adopt a wait-and-watch approach before pushing for governance reforms in RBI.

For the last few weeks, the RBI has been at loggerheads with the finance ministry on matters ranging from the appropriate size of the reserves the central bank must hold to the easing of lending norms for sectors such as small and medium enterprises. The board will be apprised of a recent decision taken by Finance Minister Arun Jaitley and Patel on the structure and the mandate of a committee to review the RBI’s economic capital framework.

In the previous board meeting, held on November 19, the board had decided to constitute a committee of experts to fix the appropriate level of economic capital framework (ECF) that the central bank should hold at any given time and the membership and terms of reference of which will be jointly determined by government and RBI.

The issue of transfer of RBI’s excess reserves, which stood at Rs 9.43 lakh crore as of June 2018, to the government has been one of the contentious issues between the government and the central bank for a long time and also one of the key reasons for the sudden resignation of Urjit Patel Monday.

The 18-member RBI board will also deliberate on relaxation of prompt corrective action norms. Of the 21 state-owned banks, 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders. These are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.

On Thursday, Das met the chiefs of a few state-run banks to discuss their concerns. Lenders requested the governor to ease the PCA norms and also sought relaxation in the one-day default norm announced in the February 12 RBI circular on reclassification of NPAs. At the November 19 meeting, the RBI board had also decided to refer the issue of relaxing PCA framework to the Board of Financial Supervision (BFS) of the central bank.

(With Agency Inputs)