Ahead of the RBI Board meeting, Congress leader P. Chidambaram said that the central government was determined to “capture” the bank to gain control over its Rs 9 lakh crore reserves.
In a series of tweets, the former finance minister also claimed that the government and the Reserve Bank of India (RBI) are heading towards a “confrontation” at the board meeting, which set to take place on Monday.
“November 19 will be a day of reckoning for central bank independence and the Indian economy,” he added. The RBI has high reserves of Rs 9.59 lakh crore and the government, if reports are to be believed, wants the central bank to part with a third of that fund. This matter, along with easing of norms for weak banks and raising liquidity, has brought the two at loggerheads in the recent weeks.
The government on November 9 had said it was discussing an “appropriate” size of capital reserves that the central bank must maintain but overruled seeking a massive capital transfer from the RBI. Economic Affairs Secretary Subhash Chandra Garg had also clarified that the government wasn’t in any dire needs of funds and that there was no proposal to ask the RBI to transfer Rs 3.6 lakh crore.
“There is no proposal to ask RBI to transfer (Rs) 3.6 or (Rs) 1 lakh crore, as speculated,” he commented. “The government’s FD (fiscal deficit) in FY 2013-14 was 5.1%. 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%. The government has actually foregone (Rs) 70,000 crore of budgeted market borrowing this year.”
Garg said that the only proposal under discussion is to exact appropriate economic capital framework of RBI. The economic capital framework refers to the risk capital required by the central bank while taking into account different risks.