Bimal Jalan led panel defers report on RBI surplus funds

The Reserve Bank of India (RBI) committee led by Bimal Jalan (former RBI governor) constituted for considering guidelines for transfer of central bank’s surplus funds to government delayed submitting its report after lack of consensus among its members. The panel was originally supposed to submit its report in April 2019.

Background

The RBI committee was appointed in December 2018 to review Economic Capital Framework (ECF) for central bank after then Union Ministry of Finance under Arun Jaitely advised RBI to transfer surplus funds to central government.

Arguments by Finance Ministry:  The finance ministry was of view that the buffer of 28% of gross assets maintained by RBI bank is well above global norm of about 14%. Thus, RBI board in its meeting held on 19 November 2018, decided to constitute a panel to examine Economic Capital Framework (ECF).

This led to loggerheads between government and RBI under its previous governor Urjit Patel (who later resigned) over Rs.9.6 lakh crore surplus capital that central bank keeps with itself.

About ECF Panel

Members: The six member committee headed by Bimal Jalan includes- Rakesh Mohan (former deputy governor of RBI) as vice-chairman, Subhash Chandra Garg (finance secretary), N S Vishwanathan (RBI deputy governor), and lastly RBI central board members Sudhir Mankad and Bharat Doshi.

Objective: The panel was entrusted to review best practices followed by central banks throughout the world in making assessment and provisions for risks.

Timeline: The ECF panel was required to submit its report to RBI within 90 days of its first meeting. The 1st meeting of ECF took place on 8 January 2019 following which the panel was given a 3 month extension.

Way Forward

The Bimal Jalan led panel will now meet one more time before submitting its report by end of June 2019 and the delay in finalising report which may be over difference of opinion will also be discussed.

Month: Current Affairs - June, 2019