BJP govt greedy, plans to take away RBI reserves, says P Chidambaram

Gladys Abbott
November 12, 2018

Mr Garg said that the only proposal concerning the reserves that the government is discussing is to fix the appropriate economic capital framework of the RBI.

"(The) government's fiscal math is completely on track.

The clarification comes amid report that the government is seeking transfer of at least a third of Reserve Bank's Rs 9.6 lakh crore reserves.

A draft economic capital framework for the RBI - which determines how much capital and internal reserves the central bank ought to have to meet its public policy mandate - was formulated in 2015. "From 2014-'15 onwards, government has succeeded in bringing it down substantially", he added.

He further said that the Government has foregone Rs 70000 crore of budgeted market borrowing this year.

However, this proposal never saw the light of the day. "What is the tearing hurry to "fix" the capital framework of RBI?" he tweeted.

On October 19, the central bank increased lenders' single borrower exposure limit for NBFCs which do not finance infrastructure, from 10 to 15 per cent of capital funds.

The statement invited sharp criticism from Congress leader and former finance minister of India P Chidambaram, who had on Thursday accused the Narendra Modi government of trying to "capture" the Reserve Bank of India to tide over its fiscal crisis.

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"If it is so, why does it need money from the reserves of RBI this year?" he said. "Which part of RBI is broken that the government is anxious to fix?" he tweeted. If it were to bring it down 14 per cent, it will free up capital around Rs 3.6 lakh crore, the people explained. 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.

It is not know if any, or all, of these elements of the RBI's public policy mandate will come up for discussion at the November 19 meeting. "Government claims that its fiscal math is correct". Out of this sum, almost Rs 7 lakh crore is categorised as revaluation reserves on account of the foreign exchange and bullion it holds.

On the cash surplus issue, a senior government official said, "The surplus that the RBI is controlling is way beyond government norms".

The RBI and the government have not been on the same page on different issues for some months now.

Earlier this week, the Indian Express had reported that the alleged rift between the Centre and the RBI was because of a proposal by the Finance Ministry.

The Reserve Bank, which follows July-June financial year, has paid about 63 per cent higher dividend than the previous year (2016-17).

For fiscal 2017-18, the RBI transferred surplus Rs 50,000 crore to the government.

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