Finance Minister Arun Jaitley and RBI governor Urjit Patel will together decide the composition of the committee for transferring the RBI surplus, multiple sources told CNBC-TV18.
The committee could have members from outside the ministry and the central bank circle as well, said one of the source close to the matter.
The differences with RBI led to the government invoking, for the first time, a provision in the RBI Act-Section 7 to start the formal process of consultation with the RBI governor on issues such as easing the PCA framework for PSU banks, boosting liquidity and transferring additional surplus from the RBI to the government.
The transfer of RBI’s surplus reserves to the government to help bridge the fiscal deficit was one of the contentious issues between the two sides.
The Modi government is concerned about low crop prices and difficulties small businesses face in borrowing to improve its prospects in numerous state elections over coming weeks, and a nationwide election due by May next year.
The funds from the RBI can be used, for example, to recapitalise public sector banks, help them expand their loan book and provide aid to struggling businesses.
At Monday’s board meeting of the central bank, it was decided to set up a panel to discuss the issue of surplus.
On November 6, the Indian Express reported that a proposal by the Finance Ministry seeking to transfer a surplus of Rs 3.6 lakh crore, more than a third of the total reserves of the central bank, to the government was not accepted by the RBI. The government, however, denied the report.
The total reserves with the RBI stood at Rs 9.6 lakh crore at the end of its financial year ended June 2018, up from Rs 8.38 lakh crore in the previous year, while its foreign assets were at Rs 26.4 lakh crore in FY18, up from Rs 23.7 lakh crore a year ago.
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