RBI Board Approves Surplus Transfer of Rs 1.76 Lakh Crore to Govt as it Accepts Bimal Jalan Panel Recommendation

On August 26, 2019, The Reserve Bank of India(RBI)’s Governor Shaktikanta Das-led RBI central board in its 578^th meeting (held in Mumbai, Maharashtra) has accepted the recommendation of high-level 6-member panel headed by its former Governor Bimal Jalan on transfer of Rs 1,76,051 crore to the government comprising of Rs 1,23,414 crore of surplus for the year 2018-19 and Rs 52,637 crore of excess provisions as per the revised Economic Capital Framework (ECF).Key points:
i. The additional cash will help the government meet its fiscal deficit target of 3.3% of the gross domestic product (GDP) for the current fiscal year(FY2019-20).
ii. The recommendations given by the panel 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 its risks.
iii. Since 2013, the central bank has been paying 99% of its disposable income to the government, which is battling with the deficits.
iv. The committee also recommends RBI to adopt a target of ES(Expected Shortfall) 99.5 % CL(Confidence Level), in view the macroeconomic stability requirements.
v. It also recommends RBI to form a framework to assess the concentration risk of the forex portfolio as well as market-credit risk.
vi. On December 26, 2018, RBI, in consultation with the central government, had formed a high-level expert committee named “Expert Committee to Review the Extant Economic Capital Framework” under Bimal Jalan to review the economic capital framework of the RBI.