Fiscal Math on Track, No Call to RBI for Funds: Govt RBI, Govt May Agree on NBFC Liquidity
But plans to press for a discussion on how much money the regulator needs to keep as surplus
New Delhi: The government rejected reports that it’s seeking .₹ 3.6 lakh crore from the Reserve Bank of India and said the fiscal situation is comfortable. But it also indicated that it would press for a discussion on how much money the regulator needs to keep as surplus, among the issues that have created a rift between the two sides.
“Lot of misinformed speculation is going around in media. Government’s fiscal math is completely on track. There is no proposal to ask RBI to transfer .₹ 3.6 (lakh crore) or .₹ 1 lakh crore, as speculated,” economic affairs secretary Subhash Chandra Garg tweeted on Friday. “Only proposal under discussion is to fix appropriate economic capital framework of RBI.” only on appropriate economic capital framework
This would suggest that, despite the RBI’s resistance, the government wants a framework for deciding the central bank’s capital requirement, which would give clarity on dividend flows to the government. The matter could be raised at the November 19 central bank board meeting.
The surplus transfer issue has been a sticking point between the two. The government feels that through transfer to contingency reserves and other funds, the RBI has more than adequate capital.
At the end of June 2018, RBI had between govt and RBI
to be discussed in Nov 19 board meeting
capital than it needs
.₹ 2.32 lakh crore in the contingency fund while the Currency and Gold Revaluation Account had .₹ 5.3 lakh crore. RBI paid .₹ 50,000 crore in dividends to the government after putting aside .₹ 14,190 crore for the contingency fund. The government feels the provisions are in excess of what’s required. Deputy governor Viral Acharya had referred to the matter in his October 26 speech, which brought into the open the differences between the Centre and the government.
“A thorny ongoing issue on this The government and the Reserve Bank of India are likely to arrive at a common ground over easing of liquidity crunch for non-banking finance companies, while staterun banks cannot become a perfect substitute for funding medium and small enterprises, DBS Bank said.
front has been that of the rules for surplus transfer from the Reserve Bank to the government,” he had said, citing media reports about the government seeking .₹ 3.6 lakh crore. The RBI feels it needs a strong balance sheet to meet all contingencies and do its job properly.
ET reported earlier this month that the government had raised 12 issues with the central bank under the hitherto unused Section 7 of the RBI Act.