Reserve Bank of India (RBI) governor on Friday met Prime Minister to discuss the ongoing tussle between the central bank and the government, said sources familiar with the matter, adding that the governor will not submit his resignation in the upcoming board meeting.

Modi and Patel had discussed the issues related to capital framework, management of surplus and non-performing assets (NPA) norms for Micro, Small and Medium Enterprises (MSME), sources privy to the matter told CNBC-TV18.

Patel's meeting with the Prime Minister came days before the RBI's crucial board meeting on November 19 during which contentious issues are likely to come up for discussion.

Tensions between the RBI and the government have recently escalated, with the finance ministry initiating discussion under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI governor.

RBI deputy governor Viral Acharya had in a speech last month talked about the independence of the central bank, arguing that any compromise could be "potentially catastrophic" for the economy.

The government may soften its stance on seeking RBI’s capital, said the sources, adding that it won’t ask for a special window for non-banking finance companies (NBFC) to ease liquidity situation.

RBI has massive Rs 9.59 lakh crore reserves and the government wants the central bank to part with a third of that fund.

RBI is likely to relieve some banks which are currently under the central bank's prompt corrective action (PCA) framework, the sources said. RBI has placed eleven state-run and one private banks under PCA framework.

Last month, RBI has rejected the government’s proposal to ease the PCA norms for banks at its board meeting.

With inputs from PTI.

First Published:Nov 12, 2018 8:58 PM IST