Jalan Panel submits report
- Any transfer of surplus by RBI should help the government retire public debt and recapitalise PSU banks and position them well to drive the credit cycle.
- Already, Finance Minister Nirmala Sitharaman has announced Rs 70,000 crore in PSU capitalisation. It is seen enabling release of Rs 5 lakh crore liquidity into the market.
- While there is no clarity as to how much of RBI’s excess reserve could be transferred to the government, The contingency fund, currency and gold revaluation account add up to Rs 9,2 lakh crore, which is 25 per cent of RBI's total balance sheet size.
- If this is brought down by 25 per cent to the global norm of 14 per cent, it would release capital up to Rs 5 lakh crore (2.4 per cent of GDP). But the actual number could be lower, analysts said.
- The committee on Economic Capital Framework was set up by the apex bank in December, 2018. It was expected to submit its report within 90 days. But it got delayed for various reasons.
- In the past, the issue of the ideal size of RBI's reserves was examined by three committees -- V Subrahmanyam (1997), Usha Thorat (2004) and Y H Malegam (2013). The Subrahmanyam committee recommended that contingency reserve should be built up to 12 per cent.
- The Thorat committee said the reserve adequacy should be maintained at 18 per cent of the total assets. The RBI board did not accept the recommendation of the Thorat committee and decided to continue with the recommendation of the Subrahmanyam panel.