Question: RBI has transferred 1.76 lakh crore to government, by agreeing to which of the following high powered committee report?
(a) Aruna Sunderajan Committee
(b) Bimal Jalan Committee
(c) U K Sinha Committee
(d) Rattan Watal Committee
Answer: (b)
Related facts:
- On 26th August, 2019; the Reserve Bank of India at its board meeting decided to transfer whopping Rs. 1.76 lakh crore to the Centre.
- It also includes interim dividend of Rs. 28, 000 crore paid in February, which is likely to address the fiscal situation of the government to a great extent.
- It also includes the Central Bank’s 2018-19 surplus of Rs. 1, 23 lakh crore and Rs. 52, 637 crore of excess provisions identified as per the revised Economic Capital Framework ECF adopted at the Board meeting.
- The RBI said as financial resilience was within the desired range, the entire 2018-19 net income of Rs 1.23 lakh crore has been transferred.
Jalan Committee:
- The RBI had formed a committee chaired by former Governor Bimal Jalan to review its economic capital framework and suggest the quantum of excess provision to be transferred to the Government.
- The Committee was formed after a demand from the Government for more money.
- The RBI board has accepted all the recommendations of the Jalan Committee.
- The Committee’s recommendations were guided by the fact that the RBI forms the primary bulwark for monetary, financial and external stability.
- The panel recommended a clear distinction between the two components of economic capital- realized and revaluation balances. Equity could be used for meeting all risks/losses as they were primarily built up from retained earnings, while revaluation could be reckoned only as risk buffers against market risk as they represented unrealized valuation gains and hence were not distributable.
- The risk provisioning made primarily from retained earnings is cumulatively referred to as the Contingent Risk Buffer and has been recommended to be maintained within a range of 6.5 % to; 5.5% of RBI’s balance sheet.
- The CRB comprising 5.5 to 4.5 % for monetary and financial stability risks and 1% for credit and operational risks.
Links:
https://www.thehindu.com/business/Economy/explained-what-does-the-176-lakh-crore-transfer-mean-to-rbi-government/article29268967.ece
https://www.thehindu.com/business/Economy/rbi-board-approves-176-lakh-cr-transfer-to-government/article29261534.ece
https://www.livemint.com/industry/banking/rbi-to-transfer-rs-1-76-lakh-crore-to-government-1566830312844.html
https://www.thehindubusinessline.com/money-and-banking/the-math-behind-rbis-record-rs-176-lakh-crore-surplus-transfer-to-the-government/article29266795.ece