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

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

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

RBI deputy governor Viral Acharya had said in his speech last month.

The meeting of the central board of the RBI on 19 November is likely to be stormy. There is no proposal to ask RBI to transfer ₹3.6 (lakh crore) or ₹1 lakh crore, as speculated.

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.

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. Once this is finalized, excess reserves could be transferred to the government, providing the latter with a fiscal cushion. The rift has widened sharply in the past few weeks and will be taken up at the RBI's forthcoming board meeting on November 19.

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. As of June 2018, the total amount in these three types of reserves exceeded ₹9 trillion with more than ₹6.9 trillion in valuation reserves, RBI's annual accounts show.

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. "No government in the past had asked for the reserve in RBI", Chidambaram said in Guwahati on Friday.

It later emerged that the government had invoked a never-before-used provision of the law -Section 7 of the RBI Act - to ease NPA norms so that banks can kickstart lending and support growth, and transfer more dividend to boost liquidity - issues which the central bank thinks cannot be relented. "There need to be some norms for how much the RBI can keep", a top Finance Ministry official told BusinessLine. Garg said there was "misinformed speculation" in the media, and that the government's fiscal math was "completely on track".

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