No Proposal From Government Seeking RBI's Surplus Reserves: Top Official

Centre trying to ‘capture’ RBI to tide over its fiscal crisis says P Chidambaram

The government's fiscal math is completely on track.

Arvind Subramanian, former chief economic adviser to the government, had argued in his Economic Surveys that the central bank was sitting on too much capital and "assuming that the RBI returns four trillion rupees of capital to the government" it could be put to productive use.

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

Kolkata: Senior Congress leader P Chidambaram on Thursday accused the Narendra Modi government of trying to capture the Reserve Bank of India (RBI) to tide over its fiscal crisis, warning that any such move would be catastrophic.

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.

The RBI distributes a part of the profits it generates as dividends to the government while transferring the rest to its reserves. The sources said the government was not seeking funds transfer to bridge the deficit but was seeking transparency in operations.


The meeting of the central board of the RBI on 19 November is likely to be stormy with the government determined to take up these issues and press for a decisive outcome. "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.

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

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

Officials in the know said the communication between the government and the RBI did not mention any amount to be transferred and only raises the issue about norms. From 2014-15 onwards, Government has succeeded in bringing it down substantially. "The government has actually foregone ₹70,000 crore of budgeted market borrowing this year", he emphasised.

These are valuation reserves for dealing with volatility in foreign exchange holdings and government securities, asset development reserves for taking care of depreciation and other asset-related costs, and a contingency reserve to take care of any unforeseen emergencies.

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