Chidambaram: Why is govt in ‘tearing hurry’ to fix RBI’s capital framework with just 4 months left for end of term

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

Chidambaram’s reaction comes two days after Economic Affairs Secretary Subhash Chandra Garg said the government was in discussion with the RBI to “fix appropriate economic capital framework” for the central bank. The capital framework governs the RBI’s capital requirements and terms for the transfer of its surplus to the government.

On November 6, the Indian Express reported that a proposal by the Finance Ministry seeking to transfer a surplus of Rs 3.6 lakh crore, more than a third of the total Rs 9.59 lakh crore reserves of the central bank, to the government was not accepted by the RBI.

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

While rejecting reports of government’s proposal to the RBI, Garg had said the fiscal math of the government was on the right track. To buttress the point, he said the government had actually foregone Rs 70,000 crore of budgeted market borrowing this year.

Chidambaram said if this was the case, then why would the government need money from the reserves of the RBI. “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?” he said.

Questioning the motive behind pressuring the RBI on an election year, the former minister, who had earlier warned that laying hands on the bank’s reserves would have catastrophic consequences, asked why the government remained mum for the past 4 years.

“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?” he said.