In a new development amidst the standoff between the Modi government and the Reserve Bank of India, it has now been reported that the Centre has asked the RBI to transfer a surplus of Rs 3.6 lakh crore, more than a third of the total Rs 9.59 lakh crore reserves of the central bank, to the government. According to a report in the Indian Express, the Finance Ministry suggested that this surplus can be managed by the government and the Central Bank jointly.

Citing sources the report further stated that the RBI thinks that this move can adversely impact macro-economic stability and therefore said a firm no to the government.

The Finance Ministry argues that the current framework was “unilaterally” adopted by the RBI in July 2017 because both the government nominees on the Board were not present during the meeting. The government did not accede to this framework and has since then been constantly seeking discussions with the RBI, the report claimed.

It further stated that the government thinks that RBI has over-estimated its capital reserves requirements resulting in excess capital of Rs 3.6 lakh crore.

The government wanted to use these funds for recapatalisation of PSU banks.

The finance ministry has also raised objections to the staggered surplus distribution policy (SSDP) of the central bank, under which the RBI transfers its surplus to the government. The ministry’s view is that RBI has been “conservative” and at times “arbitrary,” especially when it came to the transfer of the interim surplus, the report said.

Meanwhile, the head of the economic wing of RSS had said that the governor of India's central bank should work in sync with the nation's government to support economic growth or he should resign.