Bimal Jalan panel report Delayed
Published: June 27, 2019
The Bimal Jalan panel formed by the Reserve Bank of India (RBI) to review the economic capital framework of the Reserve Bank of India (RBI) has deferred the submission of its report to the central bank.
Why the deferment?
The deferment in submission is due to the difference of opinion within the six-member panel over the transfer of the RBI s excess capital reserves. Most members of the panel have agreed to a phased transfer of the RBI s capital reserves to the government over the years. But the government’s member in the panel Finance Secretary Subhash Garg is in favour of a one-time transfer.
The other area of contention is the unrealized gains. Unrealized gain refers to a profit that exists on paper, resulting from an investment. It is a profitable position which is yet to be sold in return for cash, such as a stock position that has increased in capital gains but still remains open.
The finance secretary is pushing for accounting the unrealised gains and wants the panel to recommend tapping the unrealised gains in the revaluation accounts of the central bank. The RBI had passed a board resolution against using unrealised gains as a part of dividend to the government.
Mammoth Reserves of RBI
Government is of view that the RBI is sitting on much higher reserves than it needs. Most of the central banks around the world (like the US and UK) keep 13% to 14% of their assets as reserves compared to RBI s 27%.
RBI had total assets Rs 36.17 lakh crore on its balance sheet for the year ending June 30, 2018. 27% of this, the central bank would have around Rs 9.7 lakh crore as reserves.
The government wants RBI to bring down the reserves to 14%. The RBI would be left with about Rs 5 lakh crore. An excess capital of Rs 4.7 lakh crore would be handed over to the government.
The government estimates peg RBI s excess reserves at Rs 3.6 lakh crore, while other independent estimates peg the transferable surplus at Rs 3 lakh crore.