The RBI has lowered GDP growth projections for the current fiscal to 6.1%.

The Reserve Bank of India's (RBI) Central Board met in Chandigarh on Friday and reviewed the current economic situation, global and domestic challenges and various areas of operation of the central bank as economic slowdown becomes more pronounced and the latest manipulation of loans at PMC Bank flags off a new threat to banking governance and NPA frauds while depositors are left in lurch.

"The Board was also informed about the formation of the Strategy Sub-Committee of the Central Board of Directors," the RBI said.

The Board reviewed the current economic situation, global and domestic challenges and various areas of operation of the Reserve Bank.

In this context, the Board also discussed in detail the current state of the financial sector with special focus on the regulatory and supervisory architecture of commercial banks and also NBFCs.

The RBI Central Board met amidst weak growth estimates by global agencies and the RBI itself and also the recent fraud at the PMC Bank triggering questions if the current laws on cooperative banks are enough to check frauds and protect common man's money in them.

On Thursday, HDFC Chairman Deepak Parekh, without taking PMC Bank's name, said it is "brutally unfair" that they have regular loan waivers and corporate loan write-offs but no financial system to protect the common man's savings.

"To my mind, there is no greater cardinal sin in finance than misuse of the common man's hard earned savings. It seems brutally unfair that we have allowed a system of loan waivers and write-offs every now and again, but yet we do not have a robust enough financial system to protect the honest common man's savings," Mr Parekh said while launching a centre for financial studies by B-school S.P. Jain.

The RBI has already lowered GDP growth projections for the current fiscal to 6.1 per cent. On Thursday, Moody's Investors Service slashed its 2019-20 GDP growth forecast for India to 5.8 per cent from 6.2 per cent earlier, saying the economy was experiencing a pronounced slowdown which is partly related to long-lasting factors.

Moody's attributed the deceleration to an investment-led slowdown that has broadened into consumption, driven by financial stress among rural households and weak job creation. The IMF had pared down its 2019-20 growth forecast for India in July by 30 basis points to 7 per cent, expecting weaker domestic demand to limit an economic recovery.

Last month, ADB and OECD revised their FY20 growth forecasts downward for India by 50 basis points and 1.3 percentage points to 6.5 per cent and 5.9 per cent, respectively.

Rating agency Standard & Poor's had also pared down its India growth forecast for the year to 6.3 per cent from 7.1 per cent earlier.

The Indian economy is battling a severe demand slowdown and liquidity crunch which resulted in economic growth rate falling to a six-year low of 5 per cent in the June quarter, while growth in private consumption expenditure slumped to an 18-quarter low of 3.1 per cent.

The Board discussed the role of Payment Banks and Small Finance Banks in enhancing financial inclusion, annual activity reports of Local Boards, the various sub-committees of the Board and functioning of a few Central Office departments.

On Thursday, Finance Minister Nirmala Sitharaman, after meeting the distraught depositors of PMC Bank, said that the government could bring legislation in the winter session of Parliament to improve governing of cooperative banks, if necessary.

"If amendments are going to help us curb or regulate malpractices or better empower the RBI itself, we would like to do it," she said.

The PMC Bank was put under "directions" by the RBI last month due to weak financial health, wherein the central bank has capped the deposit withdrawals at Rs 25,000. PMC is in poor financial health as well as governance allegedly due to its exposure to the near bankrupt realty player HDIL, to which it has loaned over 70 per cent of its Rs 9,000 crore in advances but all these were not reported in balance sheets.