Govt wants Rs 3.6 lakh crore from RBI, a third of its reserves, central bank says no
New Delhi : At the heart of the RBI-government standoff is a proposal by the Finance Ministry seeking to transfer a surplus of Rs 3.6 lakh crore, more than a third of the total Rs 9.59 lakh crore reserves of the central bank, to the government. The ministry has suggested that this surplus can be managed jointly by the RBI and the government.
The Finance Ministry claims that the existing economic capital framework — which governs the RBI’s capital requirements and terms for the transfer of its reserves to the government — is based on a very “conservative” assessment of risk by the central bank.
Sources have confirmed to The Indian Express that the RBI views this attempt by the Government to dip into its reserves can adversely impact macro-economic stability. And so the RBI has not accepted the proposed changes, sources said.
For its part, the Finance Ministry argues that the current framework was “unilaterally” adopted by the RBI in July 2017 because both the government nominees on the Board were not present during the meeting. The government did not accede to this framework and has since then been constantly seeking discussions with the RBI.
The government is of the view that RBI has over-estimated its capital reserves requirements resulting in excess capital of Rs 3.6 lakh crore.
That’s why, sources said, the government has proposed that the use of these funds be decided in consultation with the RBI. These funds can be used, for example, to recapitalise public sector banks, help them expand their loan book and come out of the Prompt Corrective Action framework.
The RBI, however, feels strongly that using central bank reserves has pitfalls. In its opinion, this does not tantamount to any fresh income, and was essentially in the nature of issuing new securities to fund government expenditure. Not only does it hurt the government’s commitment to fiscal prudence, it also affects the confidence of the financial markets.
The finance ministry has also raised objections to the staggered surplus distribution policy (SSDP) of the central bank, under which the RBI transfers its surplus to the government. The ministry’s view is that RBI has been “conservative” and at times “arbitrary,” especially when it came to the transfer of the interim surplus.
Sources said the ministry proposed that from 2017-18, the RBI should transfer the entire surplus to the government after taking into account its capital requirement. This is another area where the government and the RBI differ.
In 2017-18, the RBI transferred a surplus of Rs 50,000 crore to the government (comprising an interim transfer of Rs 10,000 crore), up from Rs 30,659 crore in 2016-17, but lower than in the previous three years.
The government believes that, when compared with global central banks, the RBI holds much higher total capital as a percentage of its total assets (at about 28 per cent).
Countries including the US, the UK, Argentina, France, Singapore maintain much lower capital as a percentage of total assets, while the same for countries including Malaysia, Norway and Russia are much higher than India.
The RBI maintains various types of reserves to cover various risks including market risk, operational risk, credit risk and contingency risk. For the year ending June 2018, RBI had total reserves of Rs 9.59 lakh crore, comprising mainly currency and gold revaluation account (Rs 6.91 lakh crore) and contingency fund (Rs 2.32 lakh crore).
While Contingency Fund represents the provisions made for unforeseen contingencies, the Currency and Gold Revaluation Account represent unrealised marked to market gains/losses.
In his speech on October 26, which brought into open the tussle between the finance ministry and the central bank, RBI Deputy Governor Viral Acharya said how a transfer of excess reserves from a central bank to government can be “catastrophic,” as had been proven in the case of Argentina. The transfer of $6.6 billion of its central bank’s reserves to the national treasury, sparked off “the worst constitutional crises in Argentina and led to “a grave reassessment of its sovereign risk”, Acharya asserted.
To buttress his point, Acharya quoted former Deputy Governor Rakesh Mohan to warn against the pitfalls of the government using central bank’s reserves. “The longer-term fiscal consequences would be the same if the government issued new securities today to fund the expenditure. (Raiding) the RBI’s capital creates no new government revenue on a net basis over time, and only provides an illusion of free money in the short term.”
Last Wednesday, the finance ministry said that the autonomy for the RBI “is an essential” and both the government and the RBI have to be “guided by public interest and the requirements of the Indian economy”. The government tried to defuse the tension in its relations with the RBI, which soured over the ministry starting consultations over a range of issues with the central bank under the Section 7 of the RBI Act.
Queries sent to the finance ministry and the RBI seeking comments for the story did not elicit any response.
Many economists and expert committees have in the past argued that the RBI is holding much higher capital that required to cover all its risks and contingencies. Former Chief Economic Adviser Arvind Subramanian said in Economic Survey2016-17 that the RBI is “is already exceptionally highly capitalized” and nearly Rs 4 lakh crore of its capital transfer to the government can be used for recapitalizing the banks and/or recapitalizing a Public Sector Asset Rehabilitation Agency. This proposal was opposed by the then RBI Governor Raghuram Rajan.
The Malegam Committee in 2013 estimated that the RBI was holding Rs 1.49 lakh crore of reserves and buffers in excess of its requirements.
courtesy : indianexpress.com
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CJI calls for 'unified judicial policy', use of technology to converge practices across courts
Jaisalmer (PTI): Pushing for a "unified judicial policy", Chief Justice of India Surya Kant on Saturday said technology can help align standards and practices across courts, creating a "seamless experience" for citizens, regardless of their location.
He said high courts -- due to the federal structure -- have had their own practices and technological capacities, and "regional barriers" can be broken down with technology to create a more unified judicial ecosystem.
Delivering the keynote address at the West Zone Regional Conference in Jaisalmer, Kant proposed the idea of a "national judicial ecosystem" and called for an overhaul of India's judicial system with the integration of technology.
"Today, as technology reduces geographical barriers and enables convergence, it invites us to think of justice not as regional systems operating in parallel, but as one national ecosystem with shared standards, seamless interfaces, and coordinated goals," he said.
He emphasised how the role of technology in the judiciary has evolved over time.
"Technology is no longer merely an administrative convenience. It has evolved into a constitutional instrument that strengthens equality before the law, expands access to justice, and enhances institutional efficiency," he said, highlighting how digital tools can bridge gaps in the judicial system.
Kant pointed out that technology enables the judiciary to overcome the limitations of physical distance and bureaucratic hurdles.
"It allows the judiciary to transcend physical barriers and bureaucratic rigidities to deliver outcomes that are timely, transparent and principled," he said, adding that the effective use of technology can modernise the delivery of justice and make it more accessible to citizens across the country.
The CJI called for implementing a "unified judicial policy".
He said India's judicial system has long been shaped by its federal structure, and different high courts have their own practices and technological capacities.
"India's vast diversity has led to different high courts evolving their own practices, administrative priorities and technological capacities. This variation, though natural in a federal democracy, has resulted in uneven experiences for litigants across the country," he said.
Kant underscored that predictability is crucial for building trust in the judicial system.
"A core expectation citizens place upon the courts is predictability," he said, adding that citizens should not only expect fair treatment but also consistency in how cases are handled across the country.
He pointed to the potential of technology in improving predictability.
"Technology enables us to track systemic delays and make problems visible rather than concealed," he said.
By identifying areas where delays occur, such as in bail matters or cases involving certain types of disputes, courts can take targeted action to address these issues and improve efficiency, Kant said.
The CJI explained that data-driven tools could identify the reasons behind delays or bottlenecks, allowing for faster, more focused solutions.
"Technology enables prioritisation by flagging sensitive case categories, monitoring pendency in real time and ensuring transparent listing protocols," he said.
Justice Surya Kant also discussed the importance of prioritising urgent cases where delays could result in significant harm. He highlighted his recent administrative order that ensures urgent cases, such as bail petitions or habeas corpus cases, are listed within two days of curing defects.
"Where delay causes deep harm, the system must respond with urgency," he stated, explaining that technology can help courts identify and expedite such cases.
Kant also raised the issue of the clarity of judicial decisions.
He noted that many litigants, despite winning cases, often struggle to understand the terms of their judgment due to complex legal language.
"Although the orders had gone in their favour, they remained unsure of what relief they had actually secured because the language was too technical, vague or evasive to understand," he said.
He advocated for more uniformity in how judgments are written.
"A unified judicial approach must therefore extend to how we communicate outcomes," he said.
The CJI also discussed the role of AI and digital tools in improving case management. He pointed to the potential of AI-based research assistants and digital case management systems to streamline judicial processes.
"Emerging technological tools are now capable of performing once-unthinkable functions. They can highlight missing precedent references, cluster similar legal questions, and simplify factual narration," he said, explaining how these technologies can help judges make more consistent decisions.
He also highlighted tools like the National Judicial Data Grid and e-courts, which are already helping to standardise processes like case filings and tracking.
Kant reiterated that the integration of technology into the judicial process is not just about improving efficiency but about upholding the integrity of the system and strengthening public trust.
"The measure of innovation is not the complexity of the software we deploy, but the simplicity with which a citizen understands the outcome of their case and believes that justice has been served," he said.
