"Lot of misinformed speculation is going around in media...Only proposal under discussion is to fix appropriate economic capital framework of RBI," economic affairs secretary Subhash Chandra Garg tweeted on Friday.
Sources in the finance ministry said the idea is to have a transparent economic capital framework which takes into account the amount of risk capital needed by the central bank for carrying out various functions. They said this issue was taken up forcefully during the UPA government too. The sources said the government was not seeking funds transfer to bridge the deficit but was seeking transparency in operations.
"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. A thorny ongoing issue on this front has been that of the rules for surplus transfer from the Reserve Bank to the government…" RBI deputy governor Viral Acharya had said in his speech last month.
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.
The Congress party had latched on to the issue with former finance minister P Chidambaram accusing the government of demanding Rs 1 lakh crore from the reserves of the central bank to accelerate spending against the backdrop of a tight fiscal situation.
"This government (NDA) not only wants the profit but also Rs 1 lakh crore from the reserve of RBI. This government is very greedy. No government in the past had asked for the reserve in RBI," Chidambaram said in Guwahati on Friday.
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.
"Government's fiscal deficit in FY 2013-14 was 5.1%. From 2014-15 onwards, the government has succeeded in bringing it down substantially. We will end the FY 2018-19 with fiscal deficit of 3.3%. Government has actually foregone Rs 70,000 crore of budgeted market borrowing this year," Garg said.
The statement from North Block comes ahead of the RBI's November 19 board meet, which is expected to take up the unfinished agenda of last month's meeting that had ended in a stalemate.
The frosty ties between the RBI and government have triggered a war of words and speculation has swirled about the fate of RBI governor Urjit Patel. Top sources have told TOI that the Narendra Modi government was driven to consider the extreme step of invoking the never-beforeused Section 7 of the RBI Act by central bank governor Patel's reluctance to engage with stakeholders.
from Times of India https://ift.tt/2zJ5iYw
