The ongoing rift with the government is set to play out at the RBI's crucial board meeting Monday, with the Finance Ministry nominees and some independent directors expected to take on Governor Urjit Patel and his team over issues ranging from MSME credit to the central bank's reserves, though both sides are in favour of reaching a common ground.
While there have been reports and demands from some quarters for the Governor to step down, sources said Patel is unlikely to yield under pressure and will rather mount a strong defence of the central bank's policies regarding stringent NPA recognition norms as well as measures taken to ease credit supply to MSMEs.
Patel and his four deputies, who all are members of the RBI's 18-member central board, will present a united front, while a few independent directors too are expected to support the central bank's mission to clean up bank balance sheets, sources said.
The central board, headed by the RBI Governor, is expected to discuss issues mentioned in the agenda circulated to the board members in advance.
Off-agenda items can also be raised in the meeting, with the chair's permission.
The RBI's central board currently has 18 members, though the provision is that it can go up to 21.
The members include Governor Urjit Patel and his four deputies as 'full-time official directors', while the rest 13 have been nominated by the government, including two Finance Ministry officials -- Economic Affairs Secretary and Financial Services Secretary.
Sources said the government and Reserve Bank of India (RBI) are looking to reach at an agreeable solution with respect to relaxation of the Prompt Corrective Action (PCA) framework and easing of lending norms for the MSME sector.
If not in this board meeting, the issue of relaxation of PCA framework would reach a resolution in the next few weeks, they added.