Why the hurry to fix RBI, asks Congress

Why the ‘tearing hurry’ in last four months of term, asks Chidambaram.

November 11, 2018 09:38 pm | Updated 09:39 pm IST - NEW DELHI

NEW DELHI, 29/10/2018: Former Finance Minister P. Chidambaram and Prof Rajeev Gowda addressing a press conference at the AICC Headquarters in New Delhi on Monday, October 29, 2018.  
Photo by R V Moorthy / The Hindu

NEW DELHI, 29/10/2018: Former Finance Minister P. Chidambaram and Prof Rajeev Gowda addressing a press conference at the AICC Headquarters in New Delhi on Monday, October 29, 2018. Photo by R V Moorthy / The Hindu

 

Former Union Finance Minister P. Chidambaram on Sunday questioned the Union government on its “tearing hurry” to fix the capital framework of Reserve Bank of India (RBI) when the Prime Minister Narendra Modi-led government ‘effectively’ has just four months in office.

“The NDA government has competed four years and six months of its term. It has effectively six months left. What is the tearing hurry to ‘fix’ the capital framework of RBI?” the former Finance Minister asked.

In a series of tweets, Mr. Chidambaram accused the Centre of mounting pressure on the RBI.

The former Minister asked if the Modi government’s fiscal math was on track and its claim that it had given up ₹70,000 crore of borrowing for 2018-19 was true, then why did it need money from the reserves of RBI this year.

On Friday, Economic Affairs secretary Subhash Chandra Garg had taken to twitter to clarify that the government was not in any dire need of funds and there was no proposal to transfer funds from the RBI’s reserves.

The Finance Ministry however, did indicate that it was looking at ‘fixing’ the central bank’s economic capital framework that refers to the risk capital that the RBI maintains to factor in different risks.

Right now, the RBI has ₹9.59 lakh crore reserves; reports have indicated that the Union government was keen to have some of this transferred to it, a charge denied by the Finance Ministry.

Loan guidelines flouted

In a separate press conference, the Congress alleged that the Centre had violated RBI guidelines in the newly launched loan scheme — psbloansin59.com — for micro, small and medium enterprises (MSMEs) by allegedly administering the scheme through a private company.

“MSMEs are registering thinking that these are public sector banks but the registration is done by a private company where SIDBI [a government undertaking] is only a stakeholder,” Congress spokesperson Gaurav Vallabh said at an official briefing.

The Congress spokesperson pointed out that the RBI has repeatedly flagged three issues — bad loans, cyber security and bank frauds. “There are 12 banks which are under Prompt Corrective Action (PCA) framework and they are advertising that they are ready to give MSME loans. Is it not a contradiction since RBI guildelines say that until such time a bank is under the PCA framework, they cannot give new loans,” Mr. Vallabh said.

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