RBI Panel On Economic Capital Framework Suggests Staggered Transfer Of Some Reserves

A committee set up to review the Reserve Bank of India’s economic capital framework has finalised its report and will submit it to the central bank soon, according to a person familiar with the matter.

The panel’s recommendations include a transfer of some reserves from the RBI’s balancesheet to the government over a 3-5 year period, this person said, without disclosing the amount that will be transferred. BloombergQuint had earlier reported that the interim report of the panel suggested a transfer of Rs 8,000-8,500 crore.

The person also said that the committee has recommended a periodic review of the economic capital framework from here on.

The panel, headed by former RBI governor Bimal Jalan, was set up in December following a difference of opinion between the government and the central bank on whether the latter is holding reserves in excess of what is required. The government believed that the RBI is over-capitalised and can transfer some part of its capital back to the centre. Former RBI governor Urjit Patel had opposed this ahead of his resignation.

Differences in opinion continued as the committee, which included Economic Affairs Secretary Subhash Chandra Garg, debated the matter. This was seen as one reason behind the committee’s decision to defer its report twice.

Even now, it appears that the committee report may include dissenting views.

The report will likely be submitted to the RBI soon. Even after that, the report will be discussed by the RBI central board, which had appointed the committee and is empowered to take a final call on the matter.