Slamming decision of the RBI to transfer its excess reserve to the government, bankers' body AIBEA on Wednesday said the apex bank should not be an "extension counter" of the finance ministry and what is happening now is a matter of "serious concern".
Slamming decision of the RBI to transfer its excess reserve to the government, bankers’ body AIBEA on Wednesday said the apex bank should not be an “extension counter” of the finance ministry and what is happening now is a matter of “serious concern”. The All India Bank Employees Association (AIBEA) said the RBI was created as an independent institution mandated with the responsibility of ensuring the stability in the economy besides monitoring external stability, monetary stability and money supply.
“RBI is a totally autonomous body and is not expected to be an extension counter of the finance ministry or the government. It has specific tasks to perform which should not be interfered with.
“But, what is happening now is a matter of serious concern where the RBI is apparently forced to bow down to the wishes of the government to release their funds to bridge the fiscal deficit of the government,” AIBEA said in a statement.
The RBI board on Monday accepted the recommendations of the Bimal Jalan committee and decided to transfer Rs 1,76,051 crore to the government. The amount consists of Rs 1,23,414 crore surplus or dividend for 2018-19 and another Rs 52,637 crore from its surplus capital. The umbrella body of the bank unions also said, “This was being objected to by earlier top brass of the RBI and, hence, had to leave their jobs abruptly.”
AIBEA said when the country’s economy is already facing turbulence and slowdown, instead of taking measures that will boost the economy, efforts are being taken that will further precipitate the economic instability. “Now, ways and means are being found to force the RBI to part with huge amounts in the name of transfer of surplus. Even while the surplus in the contingency fund can be transferred to the government, what has been done by the RBI now is to maintain the reserve at 5.5 per cent at the lower band instead of the higher band at 6.5 per cent,” said AIBEA General Secretary C H Venkatachalam. He said the transfer of this huge amount leaves no room for the Reserve Bank of India (RBI) to meet any contingent risk.
“This is the lowest level that the RBI has maintained thus far under the fund. This lowers the RBI’s flexibility to manoeuvre in future. Hence, looking from every angle, the pressure on RBI to transfer such huge amount is fraught with risk to the economic stability of the country and hence avoidable,” AIBEA added in the statement. It also said the government, which in the budget session of Parliament denied that India is facing any economic slowdown, has now acknowledged it as set of measures have been announced by Finance Minister Nirmala Sitharaman last week.
AIBEA said it was unfortunate that instead of taking measures to revive the economy and address the problems faced by those affected by the slowdown, the measures are only meant to help the corporates. “Further concessions have been extended to them (corporates). This is because the government, including the Prime Minister, is saying that wealth creators should be honoured, protected and respected. The real wealth creators are the workers in the factories and manufacturing sector and the poor peasants in the agriculture sector, but they are not being protected from the huge loss of employment, lay-offs, and from unremunerative prices for their produce.”
The government’s announcements would only benefit the corporates and not help to boost the real economy. The umbrella body of the bank staff said that when banks are already saddles with huge bad loans of the corporate sector, further pressure to ease credit flow to them will only aggravate the plight of the banks. “Banks are being forced to reduce the rate of interest on loans. Who will bear the loss of revenue for the banks. The government should announce equivalent subsidy and not force the burden on the Banks,” AIBEA said.