Garg added that the only proposal concerning the reserves that the government was discussing was to fix the appropriate economic capital framework of the RBI. From 2014-15 onwards, the government has succeeded in bringing it down substantially. We will end the FY 2018-19 with a fiscal deficit of 3.3%.
He further said that the Government has foregone Rs 70000 crore of budgeted market borrowing this year. "If the RBI either defies the government or RBI governor resigns, in either events, the effect will be catastrophic", he added.
As the stand-off between the government and the Reserve Bank of India (RBI) continues, secretary in the Department of Economic Affairs (DEA) Subhas Chandra Garg tweeted it is not that the government was seeking Rs 3.6 lakh crore from RBI reserves. The statement from North Block comes ahead of the RBI's November 19 board meet, which is expected to take up the unfinished agenda of last month's meeting that had ended in a stalemate.
The government is seeking a transparent formula for arriving at a minimum threshold capital reserve needed to be maintained in line with globally acceptable practice, an official claimed.
Recently, the government moved to "invoke Section 7" of the RBI Act - a never exercised power - to deal with the central bank crisis. In the interest of long-term financial health of the country, the RBI does not want to ease controls to help government achieve short-term goals of economic growth.
The government seems to believe that the RBI is overcapitalised and its mandate too wide, which loads its balance sheet with risks that warrant large capital buffers.
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The current total capital of the RBI is about Rs 10.53 lakh crore.
Gurumurthy has already written to the RBI governor complaining against deputy governor Acharya's October 26 speech that warned about the dangers of undermining the autonomy of regulators.
He said that the RBI is not a limited company.
Chidambaram said that the Centre was eyeing the RBI's reserves, for it did not get anything out of demonetisation as most of the money came back to the banks.
For fiscal 2017-18, the RBI transferred surplus Rs 50,000 crore to the government.
As per the Budget Estimate, the government has projected to collect Rs 54,817.25 crore as dividend or surplus of the Reserve Bank, nationalised banks and financial institutions. However, the government completely rejected the report that it had "asked for transferring of the surplus" or fixed Rs 3.6 lakh crore target for the RBI to transfer.