Explained: How Bimal Jalan committee report saw the light of day

Subhash Chandra Garg was expecting around Rs 1.5 trillion from the RBI

It took a single meeting of the Bimal Jalan committee to iron out the issues which were a bone of contention for the panel since the past seven months. The truce was reached at a meeting attended by finance secretary Rajiv Kumar, who became the government’s nominee replacing his predecessor Subhash Chandra Garg who was moved to the power ministry in July.

During an interview with CNBC-TV18 on Monday, when asked about the differences among the panel members, former Reserve Bank of India (RBI) deputy governor Rakesh Mohan said: “Der aaye durust aaye (better late than never).”

During the committee’s meetings, Garg had put his foot down and demanded the panel consider drawing money from the revaluation accounts of the central bank.

In fact, it was on Garg’s insistence (who had also reportedly taken the matter to the Prime Minister’s Office) that the committee had agreed to draw Rs 8,000 crore from the revaluation accounts of the RBI initially after much reluctance.

However, Garg was expecting at least Rs 1 trillion from the revaluation account, according to two officials aware of the matter. This Rs 1 trillion, according to Garg’s demand, was supposed to be used for recapitalising public sector banks through bonds — a move which had an impact on the finances of the central government right now. 

This demand was not agreeable to most of the panel members, including its chairman Jalan and vice-chairman Rakesh Mohan.

“The new finance secretary (Rajiv Kumar) decided that a truce has to be reached in the shortest possible time and decided to agree to the committee’s recommendations of not touching the revaluation reserves. This paved the way for clearing the report,” a person aware of the development said.

The meeting, which took place on August 14, decided to unanimously approve recommendations of the committee. Earlier, Garg had suggested that he will give a dissent note to the committee. After much persuasion, Garg didn’t agree to drop the dissent note, and in fact, told panel members that he will not sign the report and instead take up the matter with the central board of the RBI.

“Garg was expecting around Rs 1.5 trillion from the RBI, including a one-time transfer sum of Rs 52,637 crore, which will now happen following the committee’s recommendation,” one of the two sources cited above said.

In fact, the central board meeting of the RBI was rescheduled twice, first from August 16 to August 23 and then to August 26 to accommodate the Jalan panel report while finalising its account.

“The idea was to end the tug-of-war and arrive at a consensus with the RBI on the committee’s recommendations at the earliest. It was made possible in a matter of two meetings – one of the committee and the other of the central bank. The result is a win-win for both RBI and the government,” the source said.