RBI asked to reverse Rs.1,274.21 crore deduction from Telangana

The union finance ministry on Monday asked the Reserve Bank of India (RBI) to reverse the deduction of Rs.1,274.21 crore from the the account of Telangana as the action was "not in consonance with the principle of co-operative federalism.

The RBI had deducted the amount from the principal account of Telangana held by the apex bank in response to an income tax notice, towards the tax liability of Andhra Pradesh Beverages Corporation Limited (APBCL).

"After careful examination and consideration of issues connected, it has been decided that the deductions made by the Reserve Bank of India of an amount of Rs 1,274.21 crore on account of state of Telangana in response to the income tax notice, are not in consonance with the principle of co-operative federalism and RBI has been asked to reverse the entry," the finance ministry said in a letter issued to RBI deputy governor, an official statement said.

Referring to the constitution's article 204 (3), the finance ministry said any decision to debit cash balance of any state by the RBI should be based on some executive order issued by the competent authority after following the legislative process of appropriation.

The RBI may keep a note that money from the consolidated fund of any state shall be transferred or withdrawn only after following the constitutional and legal requirements, it added.

A copy of the letter was also sent to the governor of Telangana.