HYDERABAD: Two weeks after calling a truce, the government and the Reserve Bank of India (RBI) appear to be at loggerheads, once again. This time, it is about the structure of the proposed Economic Capital Framework and who should chair the committee.
The proposed committee will have to determine the percentage of provisions RBI should apportion out of its future profits and the surplus to be transferred to government as dividend. It has to submit its report within 90 days — that is by the end of February or early March.While the government is rooting for former RBI governor Bimal Jalan, the central bank is batting for former deputy governor Rakesh Mohan.
“Right now the committee members aren’t confirmed. There is some sort of disagreement on what should be the composition of the committee. I think, it will be done in a week or two,” a source said.
He added that with both Mohan and Jalan expressing their views, one side or the other, the discussion currently is “on what form the proposed committee can be or whether there can be a co-chair”.If done, this will be a first such committee to have such a structure, ensuring both RBI and government to have strong representatives putting across their respective viewpoints. However, it’s unclear who will have a final word should a co-chair structure is adopted.
“The governor and the finance minister will be meeting soon after the MPC meeting on Wednesday,” he explained adding that the committee will be headed by an external member, and not by RBI or government representatives.
Following the nine-hour marathon meeting on November 19, the RBI board decided to appoint the committee with four or five members within a week. But even after two weeks, the appointments are yet to come through.
While the proposed committee will include representatives of RBI and the government, the decision on appointing the members rests with Finance Minister Arun Jaitley, according to sources.The committee will not look into existing surplus and whether it should be transferred to the government, as widely speculated. RBI has Rs 9.6 lakh crore reserves, which some argued belonged to government, but the board, during the last meeting broadly agreed that accumulated surplus will not be disturbed. This has been a flashpoint in the past.
Three-day meet on interest rate begins
The Monetary Policy Committee, headed by RBI Governor Urjit Patel, on Monday began its three-day policy review deliberations amid expectations of status quo on interest rate. The MPC meet will continue till December 5