RBI to transfer Rs.66,000 crore surplus to government

Mumbai, Aug 14 (IANS) The Reserve Bank of India (RBI) has announced that it will transfer its surplus profit of Rs.65,896 crore to the central government.

“The central board of directors of the Reserve Bank of India, at its meeting held today (Thursday), approved the transfer of surplus amounting to Rs.658.96 billion for the year ended June 30, 2015 to the Government of India,” the RBI said in a statement, following a meeting of its central board chaired by governor Raghuram Rajan.

India’s central bank, whose accounting year goes from July to June had, last year, transferred Rs.52,679 crore of its surplus profit to the government.

Besides the government nominee directors on the central board – secretary department of financial services Hasmukh Adhia and the additional secretary in the department of economic affairs, Ajay Tyagi, the board meeting was also attended by chief economic adviser (CEA) Arvind Subramanian.

At its bi-monthly monetary policy review last week, the RBI kept its repo rate, at which it lends short-term to commercial banks, unchanged at 7.25 percent.

A day before the policy review, the government clarified it was not trying to curtail the central bank’s powers on a proposed monetary policy committee of the RBI.

“We are in discussion with RBI Governor Raghuram Rajan on the form and manner of the monetary policy committee,” Finance Secretary Rajiv Mehrishi told reporters here.

Noting out that the draft Indian Financial Code (IFC) is still under the government’s consideration, he said it was incorrect to conclude on the basis of the draft bill that the government was trying to curtail the RBI’s autonomy.

The draft IFC, circulated last month as a discussion paper, proposes to remove the RBI governor’s veto right in the monetary policy committee.

Besides taking away the RBI governor’s authority to veto interest rate decisions, the draft also proposed that the monetary policy committee would have four representatives of the government and only three from the central bank, including the RBI “chairperson”.

American research firm Moody’s Analytics, in a report last month, warned against the NDA government’s moves to tamper with the autonomy of the RBI in deciding on interest rates, as being potentially damaging for the economy.

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