What's The "Tearing Hurry" To Fix RBI Capital: P Chidambaram Asks Centre

11 November, 2018, 17:30 | Author: Brooke Harris
  • Senior Congress leader P Chidambaram

SC Garg, Department of Economic Affairs (DEA) Secretary, said, "Lot of misinformed speculation is going around in media".

"(The) government's fiscal math is completely on track. After days of speculations, the Economic Affairs Secretary Subash Chandra Garg clarified that the government was only in discussion with the RBI top brass to fix appropriate economic capital framework of the central bank.

Garg added that the only proposal concerning the reserves that the government was discussing was to fix the appropriate economic capital framework of the RBI. The government is seeking a dialogue on this issue, a volcano that may just be waiting to erupt as RBI deputy governors turn by turn have said the central bank needs to be well capitalised to act as a buffer in case of meltdowns and sudden risks. "Government claims that its fiscal math is correct".

The Congress had alleged that the money was being sought by the BJP-led government allegedly to dole out "freebies" ahead of the 2019 parliamentary election and had called it "the great Indian robbery". From 2014-15 onwards, the government has succeeded in bringing it down substantially. "We will end the FY 2018-'19 with FD of 3.3%".

If RBI governor Urjit Patel stands his ground, the Centre is planning to issue a direction under Section 7 of the RBI Act, 1934, directing the apex bank to transfer Rs 1 lakh crore to the government's account, he claimed.

Most central banks around the world keep 13 per cent to 14 per cent of their assets as reserve, compared with the Reserve Bank's 27 per cent, the official said.

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The tug of war between the Centre and the RBI is expected to be one of the key points of discussion at the RBI board meet on November 19.

"The Reserve Bank plans to cover not only risks in its balance sheet but also its contingent risks which arise from its public policy role in fostering monetary and financial stability", the RBI had said in its annual report in August 2015.

While the finance ministry had pointed out that close to Rs 400 crores worth of Rs 500 and Rs 1000 denominations were counterfeit, in the RBI meeting held at 5:30pm that day, the directors noted, "While any incidence of counterfeiting is a concern, Rs 400 crores as a percentage of the total quantum of currency in circulation in the country is not very significant".

RBI sources confirmed that the issue of fixing the norm on surplus reserve did figure in the recent communication between the government and the RBI. The RBI had made a dividend payout of Rs 30,659 crore for the fiscal ended June 2017.

As per the Budget Estimate, the government projected to collect Rs 54,817.25 crore as dividend or surplus of Reserve Bank, nationalised banks and financial institutions.

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