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Consensus eludes Jalan panel on RBI surplus, report delayed
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SME Times News Bureau | 24 Jun, 2019
The Reserve Bank of India (RBI) panel deciding on norms for transfer of
the central bank's surplus funds to the government has further delayed
submitting its report, an official said on Monday.
As the
differences continue among the RBI Economic Framework Capital (ECF)
panel members over the distribution of the central bank's surplus
reserves, the Bimal Jalan led-committee has sought more time to submit
its report, the official source said here.
The ECF committee
chaired by former Reserve Bank of India (RBI) Governor Bimal Jalan will
meet again in July after presentation of the full Budget, to finalise
its recommendations, according to the sources.
The six-member
panel, which was originally supposed to submit its report in April, has
delayed it for the fourth time due to lack of consensus.
Economic Affairs Secretary Subhash Chandra Garg has been unable to
attend the ECF panel meeting owing to Budget preparations, informed
sources said.
The six-member panel has former RBI Deputy Governor
Rakesh Mohan as its Vice-Chairman and includes Garg, RBI central board
members Bharat Doshi and Sudhir Mankad, and RBI Deputy Governor N.S.
Vishwanathan.
The sources add some members of the panel are in
favour of RBI lowering its excess reserves in a phased manner but not
transfer funds to the government, which proposal has obvoiusly met with
opposition from the government representatives. As per Section
47 of the RBI Act, the central bank must pay to the government any
profit remaining after making provision for bad and doubtful debts,
depreciation in assets, contributions to staff and superannuation funds,
as well as for all other matters for which provision is to be made.
In
its last two fiscals, RBI has transferred a total of Rs 27,330 crore to
the Contingency Fund. As on June 30 last year, the Contingency Fund
stood at Rs 2.32 l akh crore.
Due to the additions to the
Contingency Fund as well as other extraordinary expenditures, such as
those related to demonetisation, the RBI has transferred a lower amount
as surplus to the government.
For 2016-17 (July-June), the RBI
transferred Rs 30,659 crore, which was 50 per cent lower than the record
su rplus of Rs 65,876 crore transferred the previous year.
For the 12 months ended June, the surplus transferred was Rs 50,00 crore
According
to sources, panel members are of the view that reserves lying in the
RBI's gold and currency revaluation accounts should not be touched as
they are unrealised gains or losses.
While the government wants
excess reserves of the RBI to be transferred to the government, the
panel is in favour of government bonds of the same value being written
off from the RBI's balance sheet so that the assets and liabilities
match. This would mean there would be no explicit transfer of money from
the RBI to the government.
This route to transfer any excess
reserves has been favoured by former RBI Governor Raghuram Rajan and
former Chief Economic Adviser Arvind Subramanian.
As on June 30, 2018, the RBI held Rs 6.30 lakh crore of Indian government bonds on its balance sheet.
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