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Is excess capital for RBI a necessary evil?

The RBI has to manage systemic risk and the financial system as a whole. It can face situations where it must act as lender of last resort. It must have adequate capital, reserves and liquidity

RBI, RESERVE BANK OF INDIA, CENTRAL BANK
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Going by the events leading to the October board meeting and the proceedings of the last three meetings, it’s obvious that the government will not let loose the pressure to change the way the Indian central bank operates

Ajay Sagar
The Reserve Bank of India (RBI) has announced the constitution of a six-member panel to look into its economic capital framework. A reference to economic capital framework had come up in the context of adequacy of capitalisation and reserves at the central bank. Various stakeholders have been involved and each has its own viewpoint on the extent of capital and reserves at the bank. In determining the RBI's capital adequacy, the perceptions of the government, private sector and RBI differ vastly, driven by the interests they individually serve. As beauty lies in the eye of the beholder, the definition of
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper

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First Published: Dec 29 2018 | 7:22 PM IST

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