Published: Sat, November 10, 2018
Economy | By

Govt vs RBI, oil subsidy, real estate projects, and more

Govt vs RBI, oil subsidy, real estate projects, and more

The matter is pending before the board of the Reserve Bank of India and is likely to be taken up again at its next meeting likely on 19 November, the official told reporters, asking not to be identified citing rules.

Last year, the RBI parted with 100 billion rupees more as interim dividend - an idea opposed by Governor Urjit Patel as he seeks to strengthen the central bank's balance sheet to prepare for contingencies. "No government in the past had asked for the reserve in RBI", Chidambaram said in Guwahati on Friday.

"The government stares at a fiscal-deficit crisis".

"If the RBI either defies the government or RBI governor resigns, in either event, the effect will be catastrophic", he added.

This issue figured in the recent communication between the government and the RBI - and although the government has said it was not asking for a part of the surplus reserve to be transferred to it, the general feeling is that the fixing of a norm is the precursor to a transfer.

Economic capital framework refers to the capital required by the central bank while taking into account different risks.

He alleged that the government has packed the central bank's board with handpicked nominees, and was making every attempt to push through its proposals at the RBI board meeting on November 19. "There is no proposal to ask RBI to transfer 3.6 or 1 lakh crore, as speculated", Subhash Chandra Garg, Secretary of the Department of Economic Affairs, tweeted.

The government's demand is expected to further fuel tensions with the RBI, which has been pushing back any moves that curtail the central bank's independence.

Most central banks around the world keep 13 per cent to 14 per cent of their assets as reserve, compared with the Reserve Bank's 27 per cent, the official said.

He said the government's fiscal math "is completely on track" and dismissed media reports earlier this week that it was seeking Rs 3.6 lakh crore ($49.51 billion) from the Reserve Bank of India's reserves.

The Centre vs RBI controversy on transfer of surplus reserves became public on October 26, when RBI Deputy Governor Viral Acharya, in a speech, quoted Alberto Ramos, the Argentinian analyst at Goldman Sachs to say - "Using central bank reserves to pay government obligations is not a positive development and the concept of excess reserves is certainly open to debate".

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