MUMBAI / HYDERABAD : Ending months of speculation, the RBI board, which includes Governor Shaktikanta Das, on Monday finally accepted the Bimal Jalan panel recommendations to transfer surplus reserves to the government. The Centre will receive a windfall gain to the tune of Rs 1.76 lakh crore and the transfer is expected to help the finance ministry deliver a much-needed stimulus to the economy as well as balance its books.
But, it’s not clear if the entire amount — Rs 1,76,051 crore — will be transferred at one go or if it involves staggered payments stretching over 4-5 quarters. The issue of surplus reserves has caused much embarrassment both to the government and the central bank besides leading to several high-profile exits including RBI Governor and Deputy Governor Dr Urjit Patel and Viral Acharya, while finance secretary Subhash Garg was moved to power ministry.
Of the total sum, Rs 1,23,414 crore is towards dividend for 2018-19 and Rs 52,637 crore is towards excess risk provisions, as recommended by the Bimal Jalan Committee on Economic Capital Framework.
The amount to be transferred this year to the government will be more than double than provided for in the previous year.
While the surplus transfer is a relief to the cash-strapped government, the Jalan Committee has made it clear revaluation reserves cannot be touched. This means, no further transfer of capital from RBI. It has recommended various reserves, risk provisions and risk buffers maintained by RBI, should be continued.
The revised framework allows the Reserve Bank’s economic capital levels to be between 20 per cent and 24.5 per cent of the balance sheet. As of June 2019, since it stood at 23.3 per cent, the board decided to transfer FY19’s entire net income of Rs 1,23,414 crore (including Rs 28,000 crore already paid as interim dividend) to the government.
“As on June 30, 2019, RBI stands as a central bank with one of the highest levels of financial resilience globally,” it said. The panel also noted that the revaluation balances could only be used as risk buffers against market risks as “they represented unrealised valuation gains and hence were not distributable”.
The Jalan Committee was constituted after the issue of RBI’s surplus capital became a bone of contention between the central bank under the then governor Urjit Patel and former finance secretary S C Garg.
The RBI board also approved the committee recommendations of a surplus distribution policy targeting the level of realised equity to be maintained by RBI within the overall level of its economic capital against the earlier policy, which targeted total economic capital level.
“Only if realised equity is above its requirement, will the entire net income be transferable to the Government. If it is below the lower bound of requirement, risk provisioning will be made to the extent necessary and only the residual net income transferred...” it noted.
Rs 1,76,051 Crore
The surplus transfer, usually referred to as ‘dividend’ to the government for fiscal 2018-19 is almost double the previous record of Rs 65,896 crore in 2015-16. In fiscal 2017-18, the RBI transferred Rs 50,000 crore to the government, while in 2016-17, the dividend was only Rs 30,659 crore mainly due to demonetisation