What's the tearing hurry to fix RBI capital: P Chidambaram asks Narendra Modi government

Chidambaram has accused the BJP govt of trying to mount pressure on the RBI.

NEW DELHI: Accusing the Narendra Modi government of trying to usurp the autonomy of the Reserve Bank of India (RBI), senior Congress leader P Chidambaram on Sunday asked the Centre to explain what was its "tearing hurry" to "fix" the capital framework of the central bank.

Questioning the rationale behind the Centre's reported move to control the RBI, Chidambaram said that the BJP government has just four months to complete the term so why was it showing such a haste. 

In a series of tweets, Chidambaram slammed the BJP government for allegedly seeking funds from the RBI despite claiming that its (Centre) fiscal math was correct.

"The NDA government has completed 4 years and 6 months of its term. It has effectively 4 months left. What is the tearing hurry to 'fix' the capital framework of RBI?" he said in one of the tweets.

NDA government has competed 4 years and 6 months of its term. It has effectively 4 months left. What is the tearing hurry to “fix” the capital framework of RBI? — P. Chidambaram (@PChidambaram_IN) November 11, 2018

Continuing attack on the BJP dispensation, Chidambaram said that if the government did not need any money this financial year, why was it "mounting pressure" on the central bank in the last four months of its tenure. 

"Why did it keep silent for 4 years and 6 months?" he asked.

If the government does not need any more money this financial year, why is it mounting pressure on RBI in the last 4 months of its tenure? Why did it keep silent for 4 years and 6 months? — P. Chidambaram (@PChidambaram_IN) November 11, 2018

Taking a swipe at the BJP government, Chidambaram said that the Centre had claimed that its "fiscal math is correct" and "boasts" that it had given up Rs 70,000 crore of borrowing for 2018-19.

"If it is so, why does it need money from the reserves of RBI this year?" he said. 

Government claims that its fiscal math is correct. It boasts that it has given up Rs 70,000 crore of borrowing for 2018-19. If so, why does it need money from the reserves of RBI this year? — P. Chidambaram (@PChidambaram_IN) November 11, 2018

The Centre had on Friday said that it was discussing an "appropriate" size of capital reserves that the central bank must maintain, however, it denied seeking a massive capital transfer from the RBI.

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 recent weeks.

At the peak of a controversy over the issue, Economic Affairs Secretary Subhash Chandra Garg to clarified that the government was not in any dire need 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," Garg said in a tweet on Friday. 

"Government's FD (fiscal deficit) in FY 2013-14 was 5.1%. From 2014-15 onwards, Government has succeeded in bringing it down substantially. We will end the FY 2018-19 with FD of 3.3%.
Government has actually foregone (Rs) 70,000 crore of budgeted market borrowing this year," Garg said. 

The Economic Affairs Secretary stated that the only proposal under discussion was 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. 

(With PTI Inputs)