No Proposal From Government Seeking RBI's Surplus Reserves: Top Official

No Proposal From Government Seeking RBI's Surplus Reserves: Top Official

No Proposal From Government Seeking RBI's Surplus Reserves: Top Official

"The day of reckoning is November 19 when the RBI board is scheduled to meet". The disagreements came out in open when RBI deputy governor Viral Acharya, in a hard-hitting speech, said failure to defend the central bank's independence would "incur the wrath of the financial markets".

The government wants some of these strictures to be eased so that banks can kick start lending and support economic growth ahead of a general election early next year. Government's fiscal math is completely on track.

The government and the RBI have been clashing on several issues including the reserves question.

The RBI board is likely to discuss capital framework and other issues at its meeting scheduled for November 19. Once this is finalized, excess reserves could be transferred to the government, providing the latter with a fiscal cushion. As of June 2018, the total amount in these three types of reserves exceeded ₹9 trillion with more than ₹6.9 trillion in valuation reserves, RBI's annual accounts show.

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The RBI distributes a part of the profits it generates as dividends to the government while transferring the rest to its reserves.

RBI sources confirmed that the issue of fixing the norm on surplus reserve did figure in the recent communication between the government and the RBI.

RBI and the central government are now involved in a standoff and according to various reports, a major bone of contention between the two is that the government wants the central bank to part with a third of its Rs 9.6 lakh crore reserves. Garg added that the government was in discussions with the central bank only to fix its appropriate economic capital framework. This includes balances in Contingency Fund, Asset Development Fund (ADF), Currency and Gold Revaluation Account (CGRA), Foreign Exchange Forward Contracts Valuation Account (FCVA) and Investment Revaluation Account Rupee Securities (IRA-RS), besides some minor accounts head. He is also a former chairman of the Institute of Chartered Accountants of India.

A top finance ministry official on Friday put to rest speculation that the Centre was insisting on drawing a larger share of the Reserve Bank of India's reserves than the central bank is willing to part with.

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