NEW DELHI: Confident of meeting fiscal deficit target, the government of India on Friday clarified it is not seeking transfer of Rs 3.6 lakh crore reserves from the RBI and the only proposal under discussion is to fix appropriate economic capital framework of the central bank.
“Lot of misinformed speculation is going around in media. Government’s fiscal math is completely on track. There is no proposal to ask RBI to transfer Rs 3.6 or 1 lakh crore, as speculated,” Economic Affairs Secretary Subhash Chandra Garg tweeted.
On the fiscal road map, he said, the government will stick to the fiscal deficit target of 3.3 per cent for the current financial year.
“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 70,000 crore of budgeted market borrowing this year,” he said.
Garg further said the only proposal “under discussion is to fix appropriate economic capital framework of RBI”.
The clarification comes amidst report that the GoI is seeking transfer of at least a third of reserve bank’s Rs 9.6 lakh crore reserves.
Besides, it has also been pointed out that the government wants the RBI to part with most of its profit as dividend. The central bank, however, feels that it needs to retain a share of profits to make its balance sheet stronger.
According to another official, the government wants the RBI to have a new policy in place for dividends and capital reserves.
“Currently, the RBI’s capital needs put its provisioning at 27 per cent, while most central banks have theirs at 14 per cent. Our calculations state that if RBI provisions at 14 per cent, it can free up to Rs 3.6 lakh crore,” the official said.
The RBI board is likely to discuss capital framework and other issues at its meeting scheduled to be held on November 19.
Earlier this year, the RBI decided to pay Rs 50,000 crore as dividend to government in line with the Union Budget provisions, helping the Centre to stick to its fiscal roadmap.
The reserve bank, which follows July-June financial year, has paid about 63 per cent higher dividend than previous year (2016-17). The RBI made a dividend payout of Rs 30,659 crore for the fiscal ended June 2017.
As per the budget estimate, the government projected to collect Rs 54,817.25 crore as dividend or surplus of Reserve Bank, nationalised banks and financial institutions. The government realised Rs 51,623.24 crore under this head in the previous fiscal.
It is to be noted that the RBI transferred a surplus of Rs 30,659 crore as dividend to the government for the year ended June 30, 2017, which was less than half of what it paid in the previous year (Rs 65,876 crore).