The government's fiscal math is completely on track. The issue being discussed was for an appropriate economic capital framework.
"If the RBI either defies the government or the RBI governor resigns, in either events, the outcome will be catastrophic", he said. This proposal sought transfer of surplus of Rs 3.6 lakh crore, that amounts to approximately one-third of the RBI's reserves.
The government and the RBI have been clashing on several issues including the reserves question. "The government has packed the RBI board with its handpicked nominees and is making every attempt to ram through its proposal at the meeting", Chidambaram said.More news: The untold truth of Jim Acosta
Garg's tweet came in response to news reports that the government is asking the RBI to transfer a part of its reserve to maintain its fiscal deficit.
It later emerged that the government had invoked a never-before-used provision of the law -Section 7 of the RBI Act - to ease NPA norms so that banks can kickstart lending and support growth, and transfer more dividend to boost liquidity - issues which the central bank thinks cannot be relented. "It seems the government wants to convey that it does not plan to wipe out RBI's capital but is only looking for a reasonable share-any excess surplus that can be transferred".
He mentioned that the government's fiscal deficit in financial year 2013-14 was 5.1 per cent.More news: Giroud breaks goal duck in Chelsea win against BATE Borisov
There is no proposal from the government to ask the central bank to transfer its surplus reserves, said Subhash Chandra Garg, economic affairs secretary in the finance ministry, in a tweet on Friday. From 2014-15 onwards, the government brought this 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.
These are valuation reserves for dealing with volatility in foreign exchange holdings and government securities, asset development reserves for taking care of depreciation and other asset-related costs, and a contingency reserve to take care of any unforeseen emergencies.
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.More news: Umesh, Bumrah, Kuldeep rested for final T20I against WI