Published: Sun, November 11, 2018
Business | By Eloise Houston

Government not seeking Rs 3.6 lakh crore from RBI: DEA Secretary

Government not seeking Rs 3.6 lakh crore from RBI: DEA Secretary

Ahead of the RBI board meeting on November 19, the government on Friday categorically stated that there was no move to draw capital from the central bank's balance sheet.

The stand-off between the GoI and the RBI is boiling down to one number - Rs 3.6 lakh crore.

The issue may come up at the next RBI board meeting on November 19. Once this is finalized, excess reserves could be transferred to the government, providing the latter with a fiscal cushion. The RBI instead has 27%. "A thorny ongoing issue on this front has been that of the rules for surplus transfer from the RBI to the government". However, the government completely rejected the report that it had "asked for transferring of the surplus" or fixed Rs 3.6 lakh crore target for the RBI to transfer.

According to Malegam, the Act provides for the transfer of central bank's entire surplus in a year, after provisions, to the reserves. "The RBI Act itself says the management of RBI is entrusted to the board, with the governor and the deputies being mandated to exercise management powers subject to board's directions", Gurumurthy told ET a few days ago.

He said the only proposal "under discussion is to fix appropriate economic capital framework of RBI".

The ongoing tussle between the Centre and RBI has handed ammunition to the Opposition.

In a series of tweets, the senior Congress leader slammed the government for allegedly seeking funds from the RBI despite claiming that its (Centre) fiscal math was correct.

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

"This government (NDA) not only wants the profit but also Rs 1 lakh crore from the reserve of RBI".

Garg pointed out that the government's fiscal deficit in the 2013-'14 fiscal year was 5.1%. From 2014-15 onwards, the government has succeeded in bringing it down substantially. "Government has actually foregone Rs 70000 crore of budgeted market borrowing this year". The RBI made a dividend payout of Rs 30,659 crore for the fiscal ended June 2017.

These are valuation reserves for dealing with volatility in foreign exchange holdings and government securities, asset development reserves for taking care of depreciation and other asset-related costs, and a contingency reserve to take care of any unforeseen emergencies.

Continuing attack on the BJP dispensation, Chidambaram said that if the government did not need any money this financial year, why was it "mounting pressure" on the central bank in the last four months of its tenure.

The government's demand is expected to further escalate tensions with the RBI which has lately intensified its push for its independence and autonomy. The idea is to have a "safe level" and replace the current system where the RBI is the sole arbiter on what is "adequate".

Earlier this year, the RBI had made a decision to pay Rs 50,000 crore as dividend to government in line with the Union Budget provisions, helping the Centre to stick to its fiscal roadmap.

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