Urjit Patel, the Reserve Bank of India’s governor in front of a parliamentary committee said that the current level of currency reserves in the central bank is necessary keeping in mind international volatility and to maintain high creditworthiness.
According to the report published in Times of India, he stated to the committee that Reserves are meant “for periods of stress and not for meeting normal needs”
To brief the demonetisation and non-performing assets (NPA) situation, the governor had appeared in front of a panel on 27 November. There were many reports that said the governor directed clear of controversial issues like Section 7 of the RBI Act, NPAs and the autonomy of the central bank.
The main issue of controversy between the central bank and the government was the level of reserves to be maintained by the RBI. The RBI has earlier said that a major part of its reserves, nearly 28 per cent or Rs 9.7 lakh crore must not be touched.
The RBI officials agreed to define the level of reserves in the central bank in its board meeting on November 19, adding that a higher transfer of funds to the government will only be done if a committee recommends it.
Arun Jaitley who is the finance minister was in agreement with the governor and last week in an interview he said that the Centre’s fiscal position is comfortable and it needs no cash transfer from RBI.
Leaders of opposition threw many questions at the governor in the committee meeting over the RBI losing grip over its autonomy and its rift with the Centre.
The governor said that the effects of demonetisation were short-term and it has led to a growth in digital transactions across India. He stated that credit flow rose to over 15 per cent and inflation was under control at 4 per cent.