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

The Economic Times - - Front Page - Our Bureau

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.

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