Jalan-led panel on RBI capital reserves fails to reach consensus; to meet again before submitting final report

The RBI-appointed Bimal Jalan committee, tasked with determining the capital reserves central bank should hold, has again failed to reach a consensus, leading to a significant delay in finalising the report. The committee has now decided to meet again before submitting the final report by the June-end. The six-member panel was formed on December 26, 2018, to review the Economic Capital Framework (ECF) for the apex bank. The committee was supposed to submit its report on April 8 but was later given a three-month extension.

After the meeting on Wednesday, Jalan said the report was yet to be finalised so the committee would meet again. As per reports, the panel members are still trying to sort out the difference of opinions on the issue, and they are confident they'll be able to address them soon. A major difference of opinion is between the government's representative on the panel, Economic Secretary SC Garg, and other committee members over the transfer of "excess" capital reserves, reported Business Standard. While some of the members are of the opinion that cash reserves should be transferred in a phased manner, the government wants to make it a 'one-time transfer'.

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Apart from Jalan and Garg, other members of the panel include former deputy governor Rakesh Mohan (vice-chairman of the panel), RBI deputy governor NS Vishwanathan, and RBI central board members Bharat Doshi and Sudhir Mankad.

Surplus cash reserves with RBI

The transfer of RBI's reserves to the government has been a contentious issue between the two sides for a long time. As of June 30, 2018, the RBI's reserves stood at Rs 9.43 lakh crore, with a major portion of the reserves coming from contingency fund (Rs 2.32-lakh crore) and currency and gold revaluation account (CGRA) (Rs 6.91-lakh crore).

In the past, the issue of the ideal size of RBI's reserves was examined by three committees -- V Subrahmanyam (1997), Usha Thorat (2004) and Y H Malegam (2013). While the Subrahmanyam committee recommended that contingency reserve should be built up to 12 per cent, the Thorat committee said the reserve adequacy should be maintained at 18 per cent of the total assets. The RBI board did not accept the recommendation of the Thorat committee and decided to continue with the recommendation of the Subrahmanyam panel.

Edited by Manoj Sharma with agency inputs

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