Chidambaram sees Govt bid to ‘capture’ RBI


New Delhi, Nov.19:

Ahead of RBI Board meeting, Congress leader P Chidambaram on Sunday  alleged that the Central government was determined to “capture” the bank  to gain control over its Rs. 9 lakh crore reserves.

In a series of  tweets, the former Finance Minister also claimed that the government and  the Reserve Bank of India (RBI) was heading towards a “confrontation”  in the Monday’s board meeting of the bank.

“Government is  determined to ‘capture’ RBI in order to gain control over the reserves.  The other so-called disagreements are only a smokescreen (sic),” he said  on microblogging site Twitter.

Mr. Chidambaram said, “Nowhere in the world is the central banka board-managed company. To suggest that private business persons will direct the governor is a preposterous idea.”   “November 19 will be a day of reckoning for central bank independence and the Indian economy,” he tweeted.

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 the recent  weeks.The government on November 9 had 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.   Economic Affairs Secretary Subhash Chandra Garg had also clarified  that the government wasn’t in any dire needs 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 had said.

“The  government’s FD (fiscal deficit) in FY 2013-14 was 5.1 per cent. From  2014-15 onwards, the government has succeeded in bringing it down  substantially. We will end the FY 2018-19 with FD of 3.3 per cent. The  government has actually foregone (Rs.) 70,000 crore of budgeted market  borrowing this year.”

Garg said the only proposal “under discussion is 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.

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