RBI's record Rs1.76 lakh cr surplus transfer to govt makes room for more stimulus

The RBI made the decision to transfer the surplus on recommendations of the Jalan Committee.

Aug 27, 2019 08:08 IST India Infoline News Service

The Central Board of the Reserve Bank of India (RBI) on Monday decided to transfer a sum of Rs1,76,051cr to the Government of India (Government) comprising of Rs1,23,414cr of surplus for the year 2018-19 and Rs52,637cr of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at the meeting of the Central Board today.

It may be recalled that the RBI, in consultation with the Government of India, had constituted an Expert Committee to Review the Extant Economic Capital Framework of the Reserve Bank of India (Chairman: Dr. Bimal Jalan). The Committee has since submitted its report to the Governor of the RBI.

The Committee’s recommendations were based on the consideration of the role of central banks’ financial resilience, cross-country practices, statutory provisions and the impact of the RBI’s public policy mandate and operating environment on its balance sheet and the risks involved.

Given that the available realized equity stood at 6.8% of balance sheet, while the requirement recommended by the Committee was 6.5% to 5.5% of balance sheet, there was excess of risk provisioning to the extent of Rs11,608cr at the upper bound of CRB and Rs52,637cr at the lower bound of CRB. The Central Board decided to maintain the realized equity level at 5.5% of balance sheet and the resultant excess risk provisions of Rs52,637cr were written back.

While the revised framework technically would allow the RBI’s economic capital levels as on June 30, 2019 to lie within the range of 24.5%to 20% of balance sheet (depending on the level of realized equity maintained and availability of revaluation balances), the economic capital as on June 30, 2019 stood at 23.3% of balance sheet.

As financial resilience was within the desired range, the entire net income of Rs1,23,414 crore for the year 2018-19, of which an amount of Rs28,000cr has already been paid as interim dividend, will be transferred to the Government of India. This is in addition to the Rs52,637cr of excess risk provisions which has been written back and consequently will be transferred to the Government.

Shri Shaktikanta Das, Governor chaired the 578th meeting of the Central Board. Deputy Governors Shri N.S. Vishwanathan and Shri Mahesh Kumar Jain of the Reserve Bank of India, and other Directors of the Central Board of the Reserve Bank – Dr. Prasanna Kumar Mohanty, Shri Dilip S. Shanghvi, Shri Natarajan Chandrasekaran, Shri Bharat Doshi, Shri Sudhir Mankad, Shri Manish Sabharwal, Shri Swaminathan Gurumurthy, Ms. Revathy Iyer and Prof. Sachin Chaturvedi attended the meeting. The Government Directors Shri Rajiv Kumar, Finance Secretary and Secretary, Department of Financial Services and Shri Atanu Chakraborty, Secretary, Department of Economic Affairs, were also present.

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