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Govt wants policy on how much cash reserve RBI should have: Board member S Gurumurthy

File photo. Photograph:( Reuters )

WION Web Team New Delhi, Delhi, India Nov 15, 2018, 10.23 PM (IST)

RBI Board member S Gurumurthy said Thursday that the government is not eyeing the RBI's surplus cash reserves but only looking at the formulation of a policy that would define how much of a cash reserve the bank needed to keep with it. 

The RBI has a board meeting coming up on November 19 at which news reports had earlier said RBI Governor Urjit Patel might quit. (The latest reports have since said that threat is off the table.) 

The government and the RBI are currently embroiled in a protracted tiff over the central bank's cash reserves, with recent reports saying the government would like the central bank to hand those reserves over. 

The government would also like the RBI to ease its lending norms so that more credit is available in the market which would in turn enourage growth. 

On the matter of the cash reserves, Gurumurthy said Thursday that there were two studies on the matter — one suggesting 12 per cent reserves and the other 18.76 per cent reserves while the RBI, according to its latest balance sheets, currently holds a 27-28 per cent cash reserve.

On the matter of loosening lending norms, he said restricting banks in a bank-driven economy was like restricting the economy itself.

Gurumurthy made his comments in Delhi where he was delivering a lecture on "State of the Economy: India and the World" at the Vivekananda International Foundation (VIF). 

Gurumurthy added Thursday that the current standoff between the government and the central bank was not a happy thing at all, and a part of India`s thinking ecosystem which depends on American ideas. 

The government appointed Gurumurthy as a part-time director on the RBI Board in August this year. 

Gurumurthy is the editor of Tamil political weekly Thuglaq and the co-convenor of the RSS affiliate Swadesh Jagran Manch. 
 

Story highlights

Gurumurthy added that the current standoff between the government and the central bank was not a happy thing at all, and a part of India`s thinking ecosystem which depends on American ideas.