Accepting the recommendation of a panel headed by its former governor Bimal Jalan, the Reserve Bank of India on Monday decided to transfer a sum of Rs 1,76,051 crore to the government. “The board of central bank decided to transfer a sum of Rs 1,76,051 crore to the Government of India comprising Rs 1,23,414 crore of surplus for the year 2018-19 and Rs 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF),” the RBI said in a statement.
The committee had recommended the bank equity to be within a band of 5.5 per cent to 6.5 per cent of the balance sheet. However, the RBI board has decided to maintain it at a lower end of 5.5 per cent band to hand over Rs 52,637 crore excess to the government.
This is an addition to a total surplus transfer of Rs 1,23,414 crore.
The Bimal Jalan panel, which was set up last year to examine the RBI economic capital framework, met on August 14 to decide and recommend the transfer of the central bank’s excess reserves to the government over a period of three-five years.
There you go! The Central Board RBI has decided to transfer a sum of Rs 1,76,051 crore to the Govt comprising Rs 1,23,414 crore of surplus for 2018-19 and Rs 52,637 crore of excess provisions @IndianExpress
— P Vaidyanathan Iyer (@iyervaidy) August 26, 2019
The panel retained its major recommendations with just one change in its composition, with Finance Secretary Rajiv Kumar replaced Subhash Chandra Garg as a member. The announced surplus transfer will help the government come over any potential shortfall in its tax revenue.
Earlier, on November 6, 2018, The Indian Express had reported on the rift between the Centre and RBI over a proposal by the Finance Ministry seeking to transfer a surplus of Rs 3.6 lakh crore—more than a third of the total reserves of the central bank—to the government.
However, the ministry added that this surplus can be jointly handled by the bank and the government.
Amid this boiling issue, former RBI governor Urjit Patel too tendered his resignation from his post citing personal reasons.
After Patel’s resignation, the then Finance Minister Arun Jaitley had said that the government did not ask for Patel’s resignation, adding that the Centre does not need a single penny from the RBI’s capital reserves during the current fiscal.
Jaitley had said the issue of RBI reserves was cordially discussed between the government and the central bank during the RBI’s board meeting.