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Letters to BS: Govt must reciprocate by helping RBI to augment its reserves

RBI's reserves, which had peaked to 11.9 per cent of the balance sheet size in 2009, has been depleting since then and is now touching 5.5 per cent

Business Standard 

Liquidity management tool: RBI may have to balance old norms with the new

This refers to the report “RBI approves a record Rs 1.76 trillion surplus transfer to government” (August 27). The Reserve Bank of India (RBI) with active support from former governor Bimal Jalan and ex-deputy governor Rakesh Mohan graciously handled a tough situation. The new Economic Capital Framework, recommended by the Jalan panel and accepted by the RBI, should convince and satisfy all stakeholders. It may be recalled that RBI's reserves, which had peaked to 11.9 per cent of the balance sheet size in 2009, has been depleting since then and is now touching 5.5 per cent. The Jalan panel recommendation to maintain reserves at 5.5-6.5 per cent level has to be seen against this development. In the central bank's eagerness to support the GoI, the level has been maintained at the minimum. The government should welcome this gesture and, in the coming years, reciprocate by helping RBI to augment its reserves. Ideally, RBI's share capital should be raised from the present level of Rs 5 crore to the equivalent of $100 billion or upwards.

M G Warrier, Mumbai


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First Published: Wed, August 28 2019. 21:13 IST
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