Hyderabad, Aug 28 : All India Bank Employees Association (AIBEA) on Wednesday said the decision of Central Board of Reserve Bank of India (RBI) to transfer Rs 1.76 lakh crore in dividend and surplus reserve to the Central government will endanger economic stability. The Central Board of the Reserve Bank of India (RBI), to transfer a sum of Rs 1,76,051 crore to the Government of India comprising Rs 1,23,414 crore of surplus for the year 2018-19 and Rs 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF), was adopted at its meeting on Monday last.
AIBEA General Secretary Ch Venkatachalam in a circular to its Units and Members said, It is surprising that when our country’s economy is already facing turbulence and serious slowdown, instead of taking measures that will boost the economy, efforts are being taken which will further precipitate the economic instability. He said the RBI was specifically created as an independent institution mandated with the responsibility of ensuing the stability in the economy besides monitoring external stability, monetary stability and money supply. RBI is a totally autonomous body and is not expected to be an extension counter of the Finance Ministry or the Government, he added.
It (RBI) has very specific tasks to perform which should not be interfered with. But what is happening now is a matter of serious concern where the RBI is apparently forced to bow down to the wishes of the Central Government to release their funds to bridge the fiscal deficit of the Government, Mr Venkatachalam said. This was being objected to by earlier top brass of the RBI and hence had to leave their jobs abruptly. Now, ways and means are being found to force the RBI to part with huge amounts in the name of transfer of surplus, he said, adding RBI’s Reserves are meant to protect the various risks to the economy.
In fact the Reserves are not real reserves, rather it depends on the market fluctuations on gold price, dollar rate and rate of interest on Bonds. It is a notional gross value of the Reserves. This is unrealized surplus. This surplus cannot be separately extracted, the top union leader maintained. Even while the surplus in the Contingency Fund can be transferred to the Government, what has been done by RBI now is to maintain the Reserve at 5.5 per cent at the lower band instead of at the higher band at 6.5 per cent , thus leaving no room with the RBI to meet any unforeseen contingent risk. This is the lowest level that the RBI has maintained thus far under the fund.
This lowers the RBI’s flexibility to manoeuvre in future. Hence, looking from every angle, the pressure on RBI to transfer such huge amount is fraught with risk to the economic stability of the country and hence avoidable, the AIBEA General Secretary felt. Government’s package for economic revival – a mere eyewash : Mr Venkatachalam said, We have been expressing our serious concern about the slowdown in the economy in the recent months. We were expecting that remedial measures would be announced in the Budget.
But the Government chose to claim that the economic fundamentals are quite strong and we are moving towards a 5 trillion economy. A very rosy picture was painted before the people. No concrete measures were taken to address the problems of slowdown in the economy, he added. He, however said, Finance Minister Nirmala Sitharaman has announced various measures recently in order to revive the economy. This itself is an admission of the fact that there are problems in our economy which was stoutly denied only last month during the discussions in Parliament on the Budget. This admission has come because the slowdown is open and visible and even the Corporates and leaders of industrial houses are talking about it.
But it is unfortunate that instead of taking measures to revive the economy and address the problems faced by those who are affected by the slowdown, the measures are only meant to help the corporates who are responsible for the loot of the economy. Further concessions have been extended to them. This is because the Government including Prime Minister Narendra Modi saying that wealth creators should be honoured, protected and respected. He said the real wealth creators are the workers in the factories and manufacturing sector and the poor peasants in the agriculture sector, but they are not being protected from the huge loss of employment, lay-offs, and from un-remunerative prices for their produce.
Government’s announcements would only benefit the corporates and not help to boost the real economy. When Banks are already saddled with huge bad loans of the corporate sector, further pressures to ease credit flow to them will only aggravate the plight of the Banks. Banks are being forced to reduce the rate of interest on loans. Who will bear the loss of revenue for the Banks. Government should announce equivalent subsidy and not force the burden on the Banks. 'It is high time that the Government reviews their pro-corporate policies and take measures that will go to the succor of the suffering masses', Mr Venkatachalam said. UNI