Mumbai: The Reserve Bank of India (RBI) on Monday accepted Bimal Jalan committee's recommendations and approved a surplus transfer of Rs 1.76 lakh crore to the government.
The surplus comprises Rs 1,23,414 crore for 2018-19 and Rs 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at its board meeting.
RBI, in consultation with the government had constituted an expert committee chaired by Bimal Jalan
to review the extant economic capital framework of the RBI.
“The Committee’s recommendations were based on the consideration of the role of central banks’ financial resilience, cross-country practices, statutory provisions and the impact of the RBI’s public policy mandate and operating environment on its balance sheet and the risks involved,” RBI said in a release.
The committee’s recommendations were guided by the fact that the RBI forms the primary bulwark for monetary, financial and external stability, the central bank said.
Hence, the resilience of the RBI needs to be commensurate with its public policy objectives and must be maintained above the level of peer central banks as would be expected of a central bank of one of the fastest growing large economies of the world.
The committee recommended a surplus distribution policy which targets the level of realized equity to be maintained by the RBI, within the overall level of its economic capital vis-à-vis the earlier policy which targeted total economic capital level alone.
“Only if realized equity is above its requirement, will the entire net income be transferable to the Government. If it is below the lower bound of requirement, risk provisioning will be made to the extent necessary and only the residual net income (if any) transferred to the government,” RBI said in a release.
The six-member panel, under former RBI Governor Jalan was appointed on December 26, 2018, to review the economic capital framework (ECF) for the Reserve Bank of India (RBI) after the finance ministry wanted the central bank to follow global best practices and transfer more surplus to the government.
The surplus capital transfer would help the government meet its fiscal deficit target as it will come as a windfall to the exchequer.
The government has set a fiscal deficit target of 3.3 per cent of the gross domestic product (GDP) for the current fiscal, revised downward from 3.4 per cent pegged in the interim Budget in February.
The surplus comprises Rs 1,23,414 crore for 2018-19 and Rs 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at its board meeting.
RBI, in consultation with the government had constituted an expert committee chaired by Bimal Jalan
to review the extant economic capital framework of the RBI.
“The Committee’s recommendations were based on the consideration of the role of central banks’ financial resilience, cross-country practices, statutory provisions and the impact of the RBI’s public policy mandate and operating environment on its balance sheet and the risks involved,” RBI said in a release.
The committee’s recommendations were guided by the fact that the RBI forms the primary bulwark for monetary, financial and external stability, the central bank said.
Hence, the resilience of the RBI needs to be commensurate with its public policy objectives and must be maintained above the level of peer central banks as would be expected of a central bank of one of the fastest growing large economies of the world.
The committee recommended a surplus distribution policy which targets the level of realized equity to be maintained by the RBI, within the overall level of its economic capital vis-à-vis the earlier policy which targeted total economic capital level alone.
“Only if realized equity is above its requirement, will the entire net income be transferable to the Government. If it is below the lower bound of requirement, risk provisioning will be made to the extent necessary and only the residual net income (if any) transferred to the government,” RBI said in a release.
The six-member panel, under former RBI Governor Jalan was appointed on December 26, 2018, to review the economic capital framework (ECF) for the Reserve Bank of India (RBI) after the finance ministry wanted the central bank to follow global best practices and transfer more surplus to the government.
The surplus capital transfer would help the government meet its fiscal deficit target as it will come as a windfall to the exchequer.
The government has set a fiscal deficit target of 3.3 per cent of the gross domestic product (GDP) for the current fiscal, revised downward from 3.4 per cent pegged in the interim Budget in February.
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