In a dramatic development, the Reserve Bank of India on Monday announced that it had decided to transfer Rs 1.76 lakh crore to the central government. This was after the RBI central board decided to accept the recommendations of the Bimal Jalan Committee and approved surplus transfer to the government.
“The Central Board of the Reserve Bank of India (RBI) today decided to transfer a sum of Rs. 1,76,051 crore to the Government of India (Government) comprising of Rs. 1,23,414 crore of surplus for the year 2018-19 and Rs. 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at the meeting of the Central Board today,” NDTV quoted the statement from the RBI.
The Bimal Jalan Committee, which was constituted to decide what should be the appropriate reserves maintained by the federal bank and the dividends it must pay to the government, submitted its report on Friday last week.
The news evoked angry reactions on social media where many likened the development to India turning into a ‘Banana Republic.’
Govt. has finally decided to raid the @RBI reserves. The transfer of 1.76 lac crores looks suspiciously close to the 1.77 lac crores off hidden deficit in 2018-19 budget accounts.https://t.co/AuwkoI8Yft
This does nothing 2 enhance GoI/RBI credibility in financial markets.
— SonaliRanade (@sonaliranade) August 26, 2019
After bankrupting all PSUs and banks, the bankrupt government finally got its hands on RBI's reserves! https://t.co/sX5GJGdCnL
— Prashant Bhushan (@pbhushan1) August 26, 2019
RBI’s stock of reserves accumulated over several previous governments is now handed over to this govt
It is a raid on RBI’s reserves & autonomy, over which the former Governor & Deputy Governor had resigned in protest
Yet another institution crumbles https://t.co/jlhWCF09A9
— Praveen Chakravarty (@pravchak) August 26, 2019
The RBI statement further added that the Bimal Jalan Committee had further recommended a surplus distribution policy which targets the level of realized equity to be maintained by the RBI, within the overall level of its economic capital vis-à-vis the earlier policy which targeted total economic capital level alone.’ It added, “Only if realized 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 (if any) transferred to the Government. Within the range of CRB, i.e., 6.5 to 5.5 percent of the balance sheet, the Central Board will decide on the level of risk provisioning.”