The Government does not need RBI surplus to finance its fiscal deficit target, Finance Minister Arun Jaitley said on Monday, while stressing that the Modi-led NDA dispensation has the best track record of managing the deficit than any other previous regime. Replying to a debate on the second batch of supplementary demands for grants, Jaitley said the RBI surplus could be used to alleviate poverty and recapitalise public sector banks.
Lok Sabha later passed the supplementary demand for grants for the current fiscal to permit gross additional expenditure of Rs 85,948.86 crore, amid sloganeering by Congress and AIADMK members on Rafale and Cauvery issues. While Rs 41,000 crore would go in for capital infusion into public sector banks, Rs 2,345 crore would be infused into debt laden national carrier Air India.
“This Government has the best track record than any other previous Government in managing fiscal deficit. We do not need RBI reserves to manage the fiscal deficit... It is a priority of the government to maintain fiscal discipline, Jaitley said.
Referring to the issues concerning the Economic Capital Framework (ECF) of RBI, Jaitley said that central banks of most of the countries keep a reserve of 8 per cent, while some conservative central banks maintain 14 per cent reserves. The RBI was maintaining a reserve of 28 per cent, he said, adding the expert commitee will decide on the appropriate reserve of the central bank so that surplus funds could be utilised for funding poverty alleviation programmes and recapitalising the state-owned banks.
The Reserve Bank has a massive Rs 9.59 lakh crore worth reserves and former RBI Governor led Bimal Jalan headed six member committee has been set up to decide on the optimum capital reserves that the central bank should hold.
Jaitley said the decision to set up the committee was taken when Urjit Patel was the Governor of the RBI. Amid the economic capital framework becoming a flash-point between the RBI and the Government, Patel resigned from the job on December 10, following which the government appointed former bureaucrat Shaktikanta Das as the new RBI Governor.
Jaitley also said that the RBI board is discussing on the Basel plus framework which the central bank has stipulated for the banks to follow.
With regard to concerns expressed by some members over the agrarian situation, Jaitley said the Government will take all steps to support the farmers. “Whatever steps need to be taken till the end, the Government will take it,” he said.
Attacking the Congress for “indiscriminate” lending, Jaitley said the asset quality review conducted by the Reserve Bank in 2015 showed that bad loans in the system was to the tune of Rs 8.5 lakh crore, as against UPA’s claim of Rs 2.5 lakh crore.
Rubbishing the claims of the UPA that the NDA Government has waived loans of 15 individuals, Jaitley said “You looted the banks and lent money indiscriminately. Modi government brought back Rs 3 lakh crore worth money, threw out defaulting promoters through Insolvency and Bankruptcy Code and brought in improvement in balance sheets of banks”.
“We are trying to improve the recapitalisation of public sector banks,” the Minister added. Defending the Demonetisation and Goods and Services Tax (GST), Jaitley said they have helped in formalisation of economy and the number of income tax return filers have gone up from 3.8 crore when the UPA government left office to 6.86 crore currently. When the NDA government completes its five year term in 2019 the number of I-T return filers would double from 3.8 crore, he added