The meeting lasted nine hours, at the end of which the board decided on having an expert panel set up jointly by the government and the central bank to examine the economic capital framework to decide on matters related to the RBI's surplus reserves.
Finance Minister Arun Jaitley on Saturday said growth must not be throttled by limiting credit availability and liquidity due to the cleaning up of the banking system that he blamed on the "collectively committed sins" during 2008-14 when the previous UPA was in power.
As many as 11 banks with high non-performing assets and weak balance sheets have been brought under the prompt corrective action plan.
Apart from this, the board also made a decision to consider a restructuring scheme for loans taken by micro, small and medium enterprises (MSMEs) of upto Rs 25 crore.
Ahead of the crucial RBI Board meeting, Congress President Rahul Gandhi Monday accused Prime Minister Narendra Modi of destroying institutions and hoped Reserve Bank Governor Urjit Patel has a "spine'and will show the prime minister 'his place".
RBI governor Urjit Patel and his deputies came face to face with government nominee directors - Economic Affairs Secretary Subhash Chandra Garg and Financial Services Secretary Rajiv Kumar - and independent members like S Gurumurthy to arrive at a middle ground on some of the contentious issues.
Many RBI veterans, too, had cautioned the government against dipping its hands into RBI reserves that are essentially meant to be a cushion should the economy plunge into a full-blown crisis.
"With regard to banks under PCA, it was decided that the matter will be examined by the Board for Financial Supervision (BFS) of RBI", the RBI statement said.
"Clearly, the government does not have the capital, because of the budget deficit issues, and clearly, the banks need the capital". Patel has been averse to the government's demand as it considers the sectors to be vulnerable. Diluting the PCA on these near-sick banks would mean undoing part of the work the RBI has done so far as far as NPA clean-up goes. The next meeting is likely to focus on liquidity and governance issues.
"Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the Reserve Bank has chose to conduct purchase of government securities under Open Market Operations for an aggregate amount of Rs 80 billion on November 22, 2018 through multi-security auction using the multiple price method", the RBI said in a statement on Monday.
The good news is that the speculation on Patel's resignation remained just a speculation which is a big comfort for the financial markets. In a statement, RBI said the open market operation will be carried on the assessment of durable liquidity needs going forward. To sum up, Monday's RBI board meeting can hardly be seen as a clash between the two sides but an event when the RBI got a reminder that the government is the ultimate authority and acted accordingly.