The fight between the government and the Reserve Bank of India (RBI) over the latter's surplus capital has had a happy ending, though after some casualties, as Governor Urjit Patel and his deputy Viral Acharya exited because of differences over many issues with the government, including transfer of capital. But the Bimal Jalan Committee has made it clear that the Rs 7 lakh crore-plus revaluation reserves of the RBI cannot be touched. This is a big win for the RBI. The committee also recommended a slightly lower level of realised equity or contingency fund between 6.5 and 5.5 per cent of the balance sheet as against the current 6.8 per cent. What is surprising is that the RBI, which was fighting a few months back for its independence and also reserves, agreed to a lower band of 5.5 per cent, which released Rs 52,637 crore surplus capital for the government. Many suggest the RBI could have easily gone for a higher band of 6.5 per cent or mid-point of 6 per cent.
The second part of the surplus money that is coming to the government is from the surpluses of Rs 1.23 lakh crore generated during 2018/19. These surpluses are the result of monetary policy operations like open market operations (releasing liquidity in exchange for government bonds) and selling of foreign exchange to reduce volatility in rupee-dollar trades. Of Rs 1.23 lakh crore, Rs 28,000 crore was earlier paid as interim dividend for 2018/19. The government budgeted a dividend of Rs 90,000 crore for 2019/20. Therefore, the net from the surpluses during the year is just Rs 5,414 crore. The total additional fund that is coming to the government over and above budgeted dividend of Rs 90,000 crore is Rs 58,051 crore. Some suggest the government will ask for an interim dividend in the current year, which will add further funds to its kitty. But clearly, there is no surplus capital that the government can eye. Also, the capital transfer amount is not what the government was earlier demanding.