Former Union finance minister P Chidambaram Sunday asked the Centre what was its “tearing hurry” to “fix” the capital framework of Reserve Bank of India when the ruling dispensation had just four months to complete the term. In a series of tweets, the senior Congress leader slammed the government for allegedly seeking funds from the RBI despite claiming that its (Centre) fiscal math was correct.
“The NDA government has competed 4 years and 6 months of its term. It has effectively 4 months left. What is the tearing hurry to ‘fix’ the capital framework of RBI?” he said. Chidambaram said if the government did not need any more money this financial year, why was it “mounting pressure” on the central bank in the last four months of its tenure. “Why did it keep silent for 4 years and 6 months?” he said.
The Congress leader said the government had claimed that its “fiscal math is correct” and “boasts” that it had given up Rs 70,000 crore of borrowing for 2018-19. “If so, why does it need money from the reserves of RBI this year?” he said.
The central government had on Friday said it was discussing an “appropriate” size of capital reserves that the central bank must maintain, but denied seeking a massive capital transfer from the RBI. The RBI has a massive Rs 9.59 lakh crore reserves and the government, if reports are to be believed, wants the central bank to part with a third of that fund — an issue which along with easing of norms for weak banks and raising liquidity has brought the two at loggerheads in recent weeks.
Economic Affairs Secretary Subhash Chandra Garg took to Twitter on Friday to clarify that the government was not in any dire need of funds and that there was no proposal to ask the RBI to transfer Rs 3.6 lakh crore. “There is no proposal to ask RBI to transfer (Rs) 3.6 or (Rs) 1 lakh crore, as speculated,” he tweeted.
“Government’s FD (fiscal deficit) in FY 2013-14 was 5.1%. From 2014-15 onwards, Government has succeeded in bringing it down substantially. We will end the FY 2018-19 with FD of 3.3%. Government has actually foregone (Rs) 70,000 crore of budgeted market borrowing this year,” Garg said.
The official said the only proposal under discussion was to “fix appropriate economic capital framework of RBI”.
Economic capital framework refers to the risk capital required by the central bank while taking into account different risks.