RBI sticks to its stand; Urijit Patel says ‘reserves not for normal needs, must not be touched’

Reserve Bank of India (RBI) requires to maintain the current level of currency reserves keeping in mind international volatility and the need to maintain high creditworthiness, governor Urijit Patel told the Parliamentary Committee on Tuesday, November 28.

According to a report on The Times of India, Patel was quotes as saying, “These reserves are meant "for periods of stress and not for meeting normal needs".

The governor’s comments to the committee are significant as the Modi-led Central government and the RBI were in a bitter battle about the amount to reserves that need to be maintained by the Central Bank.

The governor had appeared in front of a panel to brief the demonetisation and non-performing assets (NPA) situation.

The RBI has contended that a large part of the reserves — estimated at around Rs 9.7 lakh crore or around 28% of its assets — are notional and should not be touched.

Leaders of opposition parties like Congress and Trinamool Congress hurled many questions at the governor in the committee meeting over the RBI losing grip over its autonomy and its rift with the Centre. Patel will submit written responses for the questions within a week.

At its board meeting on November 19, the RBI officials agreed to define the level of reserves in the central bank, adding that a higher transfer of funds to the government will only be done if a committee recommends it. The Finance Ministry and the RBI will set up a panel jointly for the same.