It was former Economic Affairs Secretary Subhash Chandra Garg's strong dissent note to the Bimal Jalan committee on the RBI's Economic Capital Framework (ECF) and his role in pushing for external currency sovereign bonds that cost him his job. He had refused to sign-off on the panel's report and now, with his exit, the panel is confused about the way forward regarding their findings and has sought the RBI's guidance on the matter.
"The committee is facing a peculiar situation. Garg didn't agree to the committee's findings and didn't sign the report in its concluding meeting. He told the panel that he will take up the matter separately with the RBI's central board, leading to a stalemate," a source told The Business Standard. The panel, including Garg, had last met on July 18 in the RBI's office in New Delhi to finalise the report.
The panel can now either choose to submit the report, without Garg's signature on it, or induct Atanu Chakraborty, the new Economic Affairs secretary, into the panel and hold further meetings before finalising it. But with the RBI's central board meeting coming up on August 16, when the regulator will finalise its balance sheet and decide upon the dividend transfers to the central government, the panel does not have a lot of manoeuvring room. The Jalan commitee needs to submit its report to RBI governor Shaktikanta Das well ahead of this meeting so that it can be circulated among the board members and its findings can be discussed.
Garg gathered spotlight in August 2018 when he circulated an internal note, claiming the Reserve Bank of India had surplus cash reserves. Subsequently, the ministry sent three letters to RBI - reportedly drafted by Garg only - and threatened to evoke Section 7 of the RBI Act, which gives the ministry power to force the RBI to act. It was on his insistence that the central board of the RBI formed a six-member committee in December to review the ECF. Garg had even recommended former governor Jalan's name to head the panel.
The finalised report has proposed a formula for a nominal transfer of a portion of the RBI's reserves to the government in a period of three-five years. Garg was expecting a transfer of around Rs 3 lakh crore from the RBI's reserve funds intially. This was at the heart of the public spat between the regulator and the government last year. But during the committee meetings, he put his foot down and insisted upon a one-time surplus transfer from the RBI to the government and dissented with the other members who pushed for installments. His decision to skip the June 24 panel meeting, supposed to be the final one, was seen as a sign of protest by the committee members who had reached out to Garg for a truce.
Garg's shift to the Power Ministry, which is considered to be of a low-profile than the Finance Ministry, came just a day after Parliamentary procedure for approval of the Modi 2.0 government's maiden union budget for 2019-20 was completed. On Thursday, he applied for voluntary retirement from service and said October 31 will be his last day as a civil servant.
Besides capital surplus transfer, as and when that happens, the government is expecting Rs 90,000 crore dividend from the RBI in the cureent fiscal against Rs 68,000 crore in FY19. As per estimates, the apex bank boasts over Rs 9 lakh crore of surplus capital.
Sushmita Agarwal with PTI inputs