Detailing further on the fiscal position of the government, Garg said, "Goverment's fiscal deficit in FY 2013-14 was 5.1 percent of the GDP". This proposal sought transfer of surplus of Rs 3.6 lakh crore, that amounts to approximately one-third of the RBI's reserves. Garg added that the government was in discussions with the central bank only to fix its appropriate economic capital framework. From 2014-15 onwards, the government has succeeded in bringing it down substantially.
He said the only proposal "under discussion is to fix appropriate economic capital framework of RBI". Patel can resist the government only to a limit. All eyes are now on November 19 meeting of RBI's board, which is expected to discuss the issue threadbare. Some other central banks calculate their capital needs based on a less stringent formula (value at risk at 99 per cent confidence level), which requires the equity-to-assets ratio to be maintained at 14 per cent. Once this is finalised, excess reserves could be transferred to the government, providing the latter with a fiscal cushion.
"No government in the past has asked for the reserve with the Reserve Bank of India", said Chidambaram, who was in Guwahati to hold consultations for preparation of the party's manifesto for the 2019 Lok Sabha polls.
In conclusion, at the end of the meeting, the RBI noted, "The Board was assured that the Government will take mitigating measures to contain the use of cash".
Officials, however, say that the government is instead looking for a review of the framework which governs the RBI's balance sheet.
The stage is set for another showdown between the Reserve Bank of India (RBI) and the Union government with the Centre sticking to its ground on Friday.
Gurumurthy has already written to the RBI governor complaining against deputy governor Acharya's October 26 speech that warned about the dangers of undermining the autonomy of regulators.
Chidambaram said if this was the case, then why would the government need money from the reserves of the RBI.
He said that the RBI is not a limited company.
Earlier this year, the RBI made a decision to pay Rs 50,000 crore as dividend to the government in line with the Union Budget provisions, helping the Centre to stick to its fiscal road map.
On June 30, RBI's surplus reserve stood at Rs 9.63 lakh crore (approx). However, the Act would have to be amended for the RBI to start transferring its surplus from previous years to the government.