RBI to transfer Rs 28,000 crore interim surplus to government

jaitley-das-rbi-ap Union Finance Minister Arun Jaitley and RBI Governor Shaktikanta Das during the 575th Central Board Meeting of Reserve Bank of India in New Delhi, on Monday | AP

The Reserve Bank of India will transfer Rs 28,000 crore in interim surplus for the period of April-December 2018 to the government. The decision was taken after a board meeting in New Delhi on Monday.

In the meeting, the board reviewed the current economic situation, global and domestic challenges and other specific areas of operations of the Reserve Bank.

“Based on a limited audit review and after applying the extant capital framework, the board decided to transfer an interim surplus of Rs 280 billion to the central government for the half year ended December 31, 2018,” the central bank said in a statement.

This will be the second successive year that the RBI will be transferring an interim surplus.

Transfer of excess reserves has been a contentious issue between the central bank and North Block. Some reports back in November 2018 had stated that the government had sought a transfer of a surplus of Rs 3.6 lakh crore from the RBI. The government later denied making any such claim.

An expert committee under former RBI governor Bimal Jalan was formed in December 2018, which will decide on what would the appropriate level of reserves that the central bank should hold.

The RBI Act states that after making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds, the bank is bound to pay the balance of the profits to the government. In the 2016-17 fiscal, the RBI transferred Rs 30,659 crore, and in 2017-18, it transferred a surplus of Rs 50,000 crore. As of June 2018, the RBI reserve funds were close to Rs 9.5 lakh crore, including contingency fund, asset development fund and currency and gold revaluation account.

In the interim budget presented earlier this month, the government had to revise its gross tax revenue target downwards by Rs 23,000 crore for the year ending March 2019, due to a shortfall in Goods and Services Tax collection. The fiscal deficit target was also breached. The interim surplus that the RBI will transfer could partly help bridge the budget gap.

While the government feels that the RBI has surplus reserves, a few others feel that the RBI may not have enough capital.

The RBI's core capital base of 6.6 per cent is lower than the average for emerging market economies and around the same as the international average including developed economies which tend to hold lower levels of capital, Mumbai-based Centre for Advanced Financial Research and Learning (CAFRAL), said in a report in January.

“Our estimates excluding exchange rate risk suggest that the RBI's core capital needs to be well above 16 per cent, which is more than double its current level of 6.6 per cent,” it had said.

Earlier in the day, finance minister Arun Jaitley addressed the RBI board in the customary post-budget meeting, outlining the various reforms and policy measures that were taken by the government in the last four years. The meeting was also attended by Shiv Pratap Shukla, minister of state for finance; Ajay Jha, finance secretary; revenue secretary Ajay Bhushan Pandey and chief economic adviser Krishnamurthy Subramanian.

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