Economy

Law doesn't allow transfer of RBI reserves to govt: YH Malegam

Law doesn't allow transfer of RBI reserves to govt: YH Malegam

The Act would have to be amended for the RBI to start transferring its surplus from previous years to the government, Malegam told CNBC-TV18 in an interview, as it only provides that all of the central bank's surplus in a year, after provisions, should be transferred.

This issue figured in the recent communication between the government and the RBI - and although the government has said it was not asking for a part of the surplus reserve to be transferred to it, the general feeling is that the fixing of a norm is the precursor to a transfer. "The government has packed the RBI board with its handpicked nominees and is making every attempt to ram through its proposal at the meeting", Chidambaram said.

In this situation, the senior Congress leader said, there were only two options for Patel: either resign or transfer the amount to the government. 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. "Finding all avenues closed, in desperation, the government has demanded Rs 1 lakh crore from the reserves of RBI", the former Union finance minister said at a press conference in Kolkata. Government's FD in FY 2013-14 was 5.1%.

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The report had further claimed that the Centre in its stand for transfer had reasoned that RBI has over-estimated its capital reserves requirements resulting in the excess capital of Rs 3.6 lakh crore. From 2014-15 onwards, Government has succeeded in bringing it down substantially. "We will end the FY 2018-'19 with FD of 3.3%. The government has actually foregone ₹70,000 crore of budgeted market borrowing this year", he emphasised. This comprises 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.

Earlier this week, the Indian Express had reported that the alleged rift between the Centre and the RBI was because of a proposal by the Finance Ministry.