You are here: Home » Economy & Policy » News
Business Standard

Jalan panel report on RBI's capital reserves likely to be out next month

The panel will propose a suitable profit distribution policy, taking into account all the likely situations of the RBI

Press Trust of India  |  New Delhi 

News digest: RBI move impact, payroll additions, US stocks fall, and more
The panel has been entrusted with the task of reviewing the best practices followed by central banks worldwide

A high-level panel led by former RBI Jalan, set up to decide the appropriate capital reserves of the , is likely to submit its report next month.

The six-member Jalan panel was appointed on December 26, 2018 to review the Economic Capital Framework for the RBI.

The broadly finalised report on RBI economic capital framework will be submitted to the in June, sources said after meeting of the panel on Monday here.

Prior to the submission of its report there will be one more meeting in June, sources said.

The panel has already got extension beyond three months term. The committee was to submit its report in 90 days from the first day of its meeting, which held on January 8.

The other key members of the committee include Rakesh Mohan, former deputy of RBI as the vice-chairman, Subhash Chandra Garg, RBI deputy NS Vishwanathan, and two RBI central board members -- Bharat Doshi and Sudhir Mankad.

The panel has been entrusted with the task of reviewing the best practices followed by central banks worldwide in making assessment and provisions for risks.

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

The government and the RBI under previous governor had been at loggerheads over the Rs 9.6 lakh crore surplus capital with the

The ministry was of the view that the buffer of 28 per cent of gross assets maintained by the 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.

In the past, the issue of the ideal size of the reserves was examined by three committees -- V Subrahmanyam in 1997, in 2004 and YH Malegam in 2013.

While the Subrahmanyam panel recommended for building a 12 per cent contingency reserve, the Thorat panel suggested it should be maintained at a higher 18 per cent of the total assets of the central bank.

The RBI board did not accept the recommendation of the and decided to continue with the recommendation of the

The Malegam panel said the RBI should transfer an adequate amount of its profit to the contingency reserves annually but did not ascribe any particular number.

According to a report by Lynch, the is likely to identify an excess buffer of up to Rs 3 lakh crore. This includes the excess capital in contingency reserves and also revaluation of reserves.

Halving the contingency reserves to a level of 3.25 per cent from the present 6.5 per cent will release Rs 1.282 lakh crore, the report said, pointing out that the level is still 50 per cent higher than what central banks in the BRICS (Brazil, Russia, India, and South Africa) grouping have.

Similarly, halving the yield cover hike to 4.5 per cent from the present 9 per cent will release another Rs 1.170 lakh crore, it said.

First Published: Mon, May 13 2019. 15:26 IST
RECOMMENDED FOR YOU