Not seeking Rs 3.6 lakh crore from RBI, says govt

Modi government trying to capture RBI ahead of LS poll P Chidambaram

Modi government trying to capture RBI ahead of LS poll P Chidambaram

The phrase "appropriate economic capital framework" is being interpreted to mean "determining the norms for surplus reserve to be maintained".

Media reports had said that the government was insisting on a payout from the central bank's reserves to tide over a tight fiscal situation ahead of state polls and general elections in 2019.

In a speech last month, RBI deputy governor Viral Acharya listed challenges to the independence of the RBI and said: "Having adequate reserves to bear any losses that arise from central bank operations and having appropriate rules to allocate profits (including rules that govern the accumulation of capital and reserves) is considered an important part of central bank's independence from the government. The government has packed the RBI board with its handpicked nominees and is making every attempt to ram through its proposal at the meeting", Chidambaram said.

He added that it would be hard to quantify a percentage amount for how much of RBI's profits should be transferred to its reserves.

Economic capital framework refers to the capital required by the central bank while taking into account different risks. "It seems the government wants to convey that it does not plan to wipe out RBI's capital but is only looking for a reasonable share-any excess surplus that can be transferred". "Finding all avenues closed, in desperation, the government has demanded Rs 1 lakh crore from the reserves of RBI", the former Union finance minister said at a press conference in Kolkata.

He mentioned that the government's fiscal deficit in financial year 2013-14 was 5.1 per cent. "From 2014-'15 onwards, government has succeeded in bringing it down substantially", he added. We will end the FY 2018-19 with fiscal deficit of 3.3%. "There need to be some norms for how much the RBI can keep", a top Finance Ministry official told BusinessLine. "The government has actually foregone ₹70,000 crore of budgeted market borrowing this year", he emphasised. This includes balances in Contingency Fund, Asset Development Fund (ADF), Currency and Gold Revaluation Account (CGRA), Foreign Exchange Forward Contracts Valuation Account (FCVA) and Investment Revaluation Account Rupee Securities (IRA-RS), besides some minor accounts head.