Saturday, 15 December, 2018

Modi govt trying to capture RBI could be catastrophic: Chidambaram

P Chidambaram during his press meet at West Bengal Pradesh Congress office at Bidhan Bhawan in Kolkata on Thursday P Chidambaram during his press meet at West Bengal Pradesh Congress office at Bidhan Bhawan in Kolkata on Thursday
Ginger Lawrence | 10 November, 2018, 08:31

Government's fiscal math is completely on track.

Chidambaram alleged that the government had 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 19 November.

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

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.

With the Reserve Bank of India's (RBI) surplus reserve running up to Rs 9.63 lakh crore, the government is now planning to ask the central bank to fix the norm on surplus reserve. Once this is finalized, excess reserves could be transferred to the government, providing the latter with a fiscal cushion.

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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.

He mentioned that the government's fiscal deficit in financial year 2013-14 was 5.1 per cent.

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. From 2014-15 onwards, the government has succeeded in bringing it down substantially. "Government has actually foregone Rs 70,000 crore of budgeted market borrowing this year". "No government in the past had asked for the reserve in RBI", Chidambaram said in Guwahati on Friday.

According to the RBI annual report, surplus reserves as on June 30, 2018 were about ₹9.63-lakh crore. 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.