No Proposal From Government Seeking RBI's Surplus Reserves: Top Official

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The rift has widened sharply in the past few weeks and will be taken up at the RBI's forthcoming board meeting on November 19.

The economic affairs secretary was confident about the government's ability to meet the fiscal deficit target for the current fiscal year and reiterated the government stand that it will adhere to fiscal prudence.

The government also wants the RBI to be lenient with capital adequacy norms, the official said, adding those norms for lenders are very stringent compared with global standards.

In a speech last month, RBI deputy governor Viral Acharya listed challenges to the independence of the RBI and said: "Having adequate reserves to bear any losses that arise from central bank operations and having appropriate rules to allocate profits (including rules that govern the accumulation of capital and reserves) is considered an important part of central bank's independence from the government". Once this is finalized, excess reserves could be transferred to the government, providing the latter with a fiscal cushion. "There is no proposal to ask RBI to transfer 3.6 lakh crore or 1 lakh crore, as speculated", he tweeted. The issue being discussed was for an appropriate economic capital framework. "A thorny ongoing issue on this front has been that of the rules for surplus transfer from the RBI to the government".

Kolkata: Senior Congress leader P Chidambaram on Thursday accused the Narendra Modi government of trying to capture the Reserve Bank of India (RBI) to tide over its fiscal crisis, warning that any such move would be catastrophic.

The November 19 board meeting of the Reserve Bank of India will likely see a sharpening of the standoff with the Finance Ministry, with the government making clear its intent to press for fixing norms for the surplus reserves to be maintained by the central bank.

However, the government clarified earlier today that the above-mentioned reports were a product of speculation and that it had no such demand from the RBI. 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.

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