New Delhi: RSS ideologue and independent director on RBI board, S. Gurumurthy, on Thursday said the government was not eyeing the central bank’s surplus reserves but only wanted clear ground rules on how much reserves it must hold. Going into specifics, which gives an idea of the dimensions of the standoff, Gurumurthy said there were two schools of thought on the matter — one advocating 12 per cent reserves and the other 18.76 per cent. However, the RBI, as per its latest balance sheet, has reserves which are 27-28 per cent of its assets.
The BJP nominee in the RBI board further dismissed the Modi government’s standoff with the RBI as a by-product of a thinking ecosystem which subsists on American ideas. ‘‘This is not an issue with the RBI but with the media, the economists and others. A correction is necessary. This is part of the correction of the Indian mind.’’
Ahead of the crucial November 19 board meeting of the central bank, he also made a case for softening of liquidity norms for lenders, saying restraining banks in a bank-driven economy was like restricting the economy itself. The RSS ideologue admitted that the standoff was not a “happy thing at all” but insisted that some policy changes needed to be looked at.
“You can’t say dollar has appreciated this much and give me that money. The government is not asking for that. As per my understanding, the government is only asking for formulation of a policy as to how much reserves the central bank must have,” he said while delivering a lecture at the Viveka-nanda International Foundation of which he is the chairman.
He said there were set norms prescribed for banks as to how much capital it must have. “In Japan, for the internationally active banks, the capital norm is 8 per cent and for domestic banks it is 4 per cent. In India, it is 9 per cent for both. I don’t know from where this 9 per cent was brought by the regulator,” he said.
So banks have less money to lend. More important, there is no discourse on this in India. Describing it as a self-inflicted malady, the RSS ideologue said: “We create problems for ourselves where problems do not exist and you get praised for that all over the world… how great an institution you are, how independent you are. So we are now guided by the same thought, and are not truly independent.”
He also pointed out that India gave up its right to print its own currency in 2002 through Fiscal Responsibility and Budget Management (FRBM) Act. “So the Indian rupee gets expanded when dollar comes to India. There is no other way Indian rupee gets generated. We have given up our right to print. That means the government cannot borrow from the RBI.
“It is not necessary that if they (US, Japan) print, we should also print. But if we need, can we print today? There is a liquidity problem. Can the government of India say I will give you (RBI) Rs 1 lakh crore worth of securities and you give me the cash? It cannot do that because it passed a law giving up that power. It’s an issue which needs to be discussed.’’
Can you have a national economics based on inflow of foreign currency, he demanded. He said India needed to think, debate and discuss making amendments to the FRBM Act so that the government can print Indian currency in time of need.
During his speech, he also said that the Indian economy would have collapsed if the government had not demonetised high-value currency notes in 2016.
Replying to a question, he said it is unfortunate that economists and intellectuals have not taken the right position on demonetisation and GST. “…it is not an economical discourse. It has become a political and ideological discourse … this is a matter for the ruling party to convince the people and the opposition party to convince the people…,” he added.
(Input from online portals)