Subhash Chandra Garg's move to seek early retirement after being shifted out as finance and economic affairs secretary to the power ministry has hit an early resolution of the government's ongoing tussle with the Reserve Bank of India (RBI) for more dividend payments. The exit of Garg, who has sought voluntary retirement, is likely to further delay the report of the Jalan panel, headed by former RBI governor Bimal Jalan. The panel was formed to define an economic capital framework for the RBI based on which the central bank would transfer its surplus reserves to the government. RBI Governor Shaktikanta Das appointed the panel following pressure from former Finance Minister Arun Jaitley, who had a running battle with Das' predecessor Urjit Patel over the surplus.
Garg, who was on the panel in his capacity as economic affairs secretary, was the most vocal advocate for reducing the cash reserves that the RBI maintains for monetary correction during financial emergencies. Setting a lower turnover-to-reserve ratio would free up more cash for transfer to the government. Reports suggest that the Jalan panel has recommended the transfer of a larger share of reserves to the government than until now, Garg had been pushing for an even larger allocation. Garg reportedly refused to sign the report of the panel chaired by Jalan and co-chaired by Rakesh Mohan, a former RBI deputy governor.
Now that Garg has sought early retirement after being posted as power secretary, an obvious demotion to a top bureaucrat, the panel has sought RBI's advice on how to proceed with the report. "The committee is facing a peculiar situation. Garg did not agree to the committee's findings and did not sign the report in its concluding meeting," a report in the Business Standard citing unidentified sources says. "He told the panel that he will take up the matter separately with the RBI's central board, leading to a stalemate," the source said.
The Rajasthan cadre IAS officer was appointed finance secretary in March, during the last few days of the previous tenure of Prime Minister Narendra Modi's government. Garg's relegation is the most high-profile reshuffle of the bureaucracy by Nirmala Sitharaman after succeeding Jaitley as finance minister.
The Jalan panel met on July 18 to finalise the report, but Garg stood his ground and made clear his intention to add a dissent note. The report citing an unidentified panel member said some of the committee members met on Thursday and put the ball in the RBI's court to find a way forward. It says the two options of the committee are: Submit the report without Garg's signature or induct the new economic affairs secretary, Atanu Chakraborty, who took charge on Thursday, into the panel and hold further meetings to finalise the report.
The committee is apparently running out of time as the RBI's central board meeting is scheduled for August 16, when the regulator will finalise its balance sheet and decide upon the dividend transfers to the government. There are suggestions that the failure to appoint a replacement of Garg will delay the panel's report to the RBI and make it impossible for the board to consider it in this meeting.