RBI needs its current reserves, reiterates Urjit Patel

New Delhi, Nov 28: 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.

These reserves are meant to be used during periods of stress, and not for normal needs, said Patel, according to a Times of India report.

The governor had appeared in front of a panel to brief the demonetisation and non-performing assets (NPA) situation. There were many reports that said Patel steered clear of controversial issues like Section 7 of the RBI Act, NPAs and the autonomy of the central bank.

Patel's comments are significant in the light of the committee determining the appropriate levels of reserves the central bank ought to hold.

The RBI has a massive Rs 9.59 lakh crore reserves, which is "more than adequate" and can transfer over Rs 1 trillion to the government after a specially constituted panel identifies the "excess capital", a PTI report said quoting a brokerage report.

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.

Patel told the panel there is no stress in the economy. Finance Minister Arun Jaitley was in agreement with the governor and said in an interview last week that the Centre's fiscal position is comfortable and it needs no cash transfer from RBI.

The RBI Governor appeared before the panel days after the central bank's face-off with the finance ministry over issues ranging from appropriate size of reserves to be maintained by RBI to easing of lending norms for small and medium enterprises.

Former Prime Minister Manmohan Singh is a member of the committee headed by senior Congress leader and former Union Minister M Veerappa Moily.