Venkatachalam added that the apex bank has very specific tasks to perform, and could do without interference. But what is happening now is a matter of serious concern where the RBI is apparently forced to bow to the wishes of the Government to release its funds to bridge fiscal deficit.
RBI’s Reserves are meant to protect the various risks to the economy, Venkatachalam said, adding that the reserves are, in fact. not real reserves, and depend on the market fluctuations in gold price, dollar rate and rate of interest on bonds. It is a notional gross value and is actually unrealised surplus. This surplus cannot be separately extracted, he asserted.
Venkatachalam added that even while the surplus in the contingency fund can be transferred to the government, what has been done by RBI now is to maintain the Reserve at the lower band of 5.5 per cent instead of at the higher band of 6.5 per cent, leaving little room for it to meet unforeseen contingencies. This is the lowest level that the RBI has maintained thus far under the fund and lowers the apex bank's flexibility to manoeuvre in future.