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

11 November, 2018, 12:43 | Author: Eric Barnett
  • Centre trying to ‘capture’ RBI to tide over its fiscal crisis says P Chidambaram

There is no proposal from the government to ask the central bank to transfer its surplus reserves, said Subhash Chandra Garg, economic affairs secretary in the finance ministry, in a tweet on Friday.

This framework would stipulate the amount of reserves that the Central bank should maintain.

The Opposition Congress had alleged that the government was trying to accessing the RBI's money to dole out "freebies" ahead of the 2019 Lok Sabha elections and had called it "the great Indian robbery".

In what looks like easing of tensions, the government has denied making any proposal to RBI asking to transfer Rs 3.6 or 1 lakh crore surplus.

Section 7 of the RBI Act gives special powers to the government to issue directions to the RBI governor on issues of public interest. There is no proposal to ask the RBI to transfer Rs 3.6 or 1 lakh crore (trillion), as speculated.

This comes as yet another giveaway as the elementary interpretation of "appropriate economic capital framework" is fixing a suitable norm for surplus reserve.

A senior finance ministry official on Friday said the government has not sought Rs 3.6 lakh crore capital from the Reserve Bank of India as a recent news report suggested.

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.

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 RBI calculates its capital needs based on "stressed value-at-risk" valuations at a 99.99 per cent confidence interval, while the government wants the central bank to use just "value-at-risk" (VAR) at a 99 per cent confidence interval, which most other central banks use.

The government will not compromise on seeking the RBI's excess capital as part of a framework, but will be flexible on the amount to be paid and is willing to negotiate, top sources in the government said.

The economic affairs secretary was confident about the government's ability to meet the fiscal deficit target for the current fiscal year and reiterated the government stand that it will adhere to fiscal prudence.

"The government's fiscal deficit in 2013-14 (FY14) was 5.1 per cent of gross domestic product (GDP)". "From 2014-'15 onwards, government has succeeded in bringing it down substantially", he added. We will end the FY 2018-19 with a fiscal deficit of 3.3%. "Government has actually foregone Rs 70,000 crore of budgeted market borrowing this year", Garg said.

"What is this jargon put out by the government about "fix the economic capital framework of the RBI"?..." The RBI had made a dividend payout of Rs 30,659 crore for the fiscal ended June 2017.

Sources say that transfer of surplus reserves also figured in the Economic Survey crafted by former Chief Economic Adviser Arvind Subramanian, who batted for RBI transferring over Rs 4 lakh crore to the government.



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