Consensus eludes Jalan panel on RBI surplus, report delayed

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.