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RBI Board to meet today to discuss Jalan committee recommendations on surplus reserves

BusinessToday.In     August 26, 2019

The Reserve Bank of India (RBI) Board will hold a meeting on Monday to discuss the recommendations of the Bimal Jalan Committee on Economic Capital Framework. The Economic Capital Framework report, which was submitted to RBI Governor Shaktikanta Das on Friday, has reportedly suggested that the RBI should transfer surplus cash reserves to the government in a phased manner over three-five years. The RBI board is likely to seek more time to study these recommendations and may not take the final decision on the panel's proposals today.

Based on the Jalan panel recommendations, the RBI could start transferring its first tranche of surplus cash this calender, reported IANS citing sources. In FY19, the government had received Rs 40,000 crore as interim dividend from the RBI. The RBI Board is likely to give a go-ahead for an additional Rs 28,000 crore dividend announced by the apex bank in February. In FY20 so far, the RBI has announced dividend worth Rs 9,000 crore to the central bank.

The committee, which met in July for the final time, has reportedly recommended transferring of funds from both contingency and revaluation reserves. Though there's no clarity on the committee's suggestion on the amount of money to be transferred to the government, Finance Minister Nirmala Sitharaman had budgeted to receive dividends worth over Rs 1.6-lakh crore from the central bank this year.

Also read: Jalan panel proposes transfer of RBI reserves to govt in tranches over 3-5 years

The central bank had the total surplus cash reserves of Rs 9.43 lakh crore as on June 30, 2018. It has seen a manifold rise in its surplus funds after a surge in its revaluation reserves from Rs 1.99 lakh crore in FY09 to Rs 6.922 lakh crore in FY18. During the same period, its contingency fund rose to Rs 2.32 lakh crore. Right now, the central bank's assets development fund amounts to Rs 22,811 crore and its foreign exchange forward contracts are valued at 3,262 crores. The RBI's investment revaluation account is worth Rs 13,285 crore.

The transfer of RBI's reserves to the government has been a contentious issue between the two sides for a long time. The government and the RBI under the previous governor Urjit Patel were at loggerheads over the issue of the surplus capital with the central bank. The finance ministry was of the view that the buffer of 28 per cent of gross assets maintained by the RBI is well above the global norm of around 14 per cent. Following this, the RBI board in its meeting on November 19, 2018, decided to constitute a panel to examine ECF.

Edited by Manoj Sharma

Economic capital framework: Fixing something that ain't broke

Also read: RBI has more than 'adequate' cash reserves; can transfer Rs 1-lakh crore to govt: report 

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