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Jalan panel holds 1st meeting to examine reserve amount of Reserve Bank

The government and RBI under previous governor Urjit Patel had been at loggerheads over the Rs 9.6 trillion surplus capital with the central bank

Press Trust of India  |  New Delhi 

Bimal Jalan

A high-level panel led by former RBI governor on Tuesday held its first meeting to decide on an appropriate size of reserves that the central bank should maintain and the dividend it should give to the government.

The six-member panel is likely to submit its report in April, sources said.

The panel has been entrusted with the task of reviewing the best practices followed by central worldwide in making assessment and provisions for risks which a central bank balance sheets are subject to.

The panel having former as its vice chairman will propose a suitable profit distribution policy taking into account all the likely situations of RBI, including the situation of holding more provisions than required.

The government and RBI under previous governor had been at loggerheads over the Rs 9.6 trillion surplus capital with the central bank.

The ministry was of the view that the buffer of 28 per cent of gross assets maintained by RBI is well above the global norm of around 14 per cent.

Following this, the RBI board in its meeting on November 19, 2018 decided to constitute a panel to examine Economic Capital Framework.
The committee also includes and two members of RBI central board -- Bharat Doshi and Sudhir Mankad.

RBI Deputy Governor NS Vishwanathan is the sixth member of the committee.

In the past, the issue of the ideal size of RBI's reserves has been examined by three committees -- V Subrahmanyam (1997), (2004) and Y H Malegam (2013).

While the recommended that contingency reserve should be built up to 12 per cent, the said the reserve adequacy should be maintained at 18 per cent of the total assets.

While the RBI board did not accept the views of the Thorat committee, it decided to go ahead with the recommendation of the Subrahmanyam panel.

The recommended that adequate amount of profits should continue to be transferred each year to contingency reserves.

First Published: Tue, January 08 2019. 14:30 IST