<p>A panel under former RBI Governor Bimal Jalan set up to suggest how much capital reserves the central bank should keep as a buffer, is set to recommend giving a major chunk to the Centre, a move that is sure to cheer the next government after the elections.</p>.<p>The Jalan committee is expected to submit its report next month.</p>.<p>The RBI currently has a buffer of 28% of its total assets as reserve against the global norm of 13%-14%. “Why should the RBI keep such high reserves with itself? It serves no purpose. It should be channelled to productive use,” a top source privy to the development told <span class="italic">DH</span>.</p>.<p>“Even if we go a little below 20%, we will be way above the global norm,” the top source added .</p>.<p>Governments, year after year, seek more reserves as dividend payout from the RBI and the central bank obliges, albeit reluctantly.</p>.<p>But last year, the differences between the government and RBI under then Governor Urjit Patel came into the open. The finance ministry wanted to have a major portion of the Rs 9.6 lakh crore of reserves shifted to the government’s accounts a year ahead of elections.</p>.<p>The move was vociferously opposed by Patel. After Patel’s resignation, incumbent Shaktikanta Das, in consultation with the government, last year set up a committee to examine the capital framework of RBI.</p>.<p>The Centre got Rs 68,000 crore as dividend from the RBI in 2018-19, which was the highest payout ever.</p>.<p>Former chief economic advisor Arvind Subramanian had suggested that the government can claim Rs 4.5 lakh core or more in excess capital from the RBI. Prior to Subramanian, a committee set up under former RBI deputy governor Usha Thorat had suggested that RBI should keep a buffer of 18% of its gross assets.</p>.<p>However, former RBI Governor Raghuram Rajan was absolutely against the move, saying reserves were part of contingency fund held by the central bank.</p>.<p>“They lend strength to make its balance sheet unimpeachable. And, at a time when the government of India wants to borrow from abroad, a strong RBI with AAA rating comes in handy,” according to Rajan.</p>.<p>Besides Jalan, the members of the panel include former deputy governor of RBI Rakesh Mohan as the vice-chairman, finance secretary Subhash Chandra Garg, RBI deputy governor N S Vishwanathan, and two RBI central board members — Bharat Doshi and Sudhir Mankad.</p>
<p>A panel under former RBI Governor Bimal Jalan set up to suggest how much capital reserves the central bank should keep as a buffer, is set to recommend giving a major chunk to the Centre, a move that is sure to cheer the next government after the elections.</p>.<p>The Jalan committee is expected to submit its report next month.</p>.<p>The RBI currently has a buffer of 28% of its total assets as reserve against the global norm of 13%-14%. “Why should the RBI keep such high reserves with itself? It serves no purpose. It should be channelled to productive use,” a top source privy to the development told <span class="italic">DH</span>.</p>.<p>“Even if we go a little below 20%, we will be way above the global norm,” the top source added .</p>.<p>Governments, year after year, seek more reserves as dividend payout from the RBI and the central bank obliges, albeit reluctantly.</p>.<p>But last year, the differences between the government and RBI under then Governor Urjit Patel came into the open. The finance ministry wanted to have a major portion of the Rs 9.6 lakh crore of reserves shifted to the government’s accounts a year ahead of elections.</p>.<p>The move was vociferously opposed by Patel. After Patel’s resignation, incumbent Shaktikanta Das, in consultation with the government, last year set up a committee to examine the capital framework of RBI.</p>.<p>The Centre got Rs 68,000 crore as dividend from the RBI in 2018-19, which was the highest payout ever.</p>.<p>Former chief economic advisor Arvind Subramanian had suggested that the government can claim Rs 4.5 lakh core or more in excess capital from the RBI. Prior to Subramanian, a committee set up under former RBI deputy governor Usha Thorat had suggested that RBI should keep a buffer of 18% of its gross assets.</p>.<p>However, former RBI Governor Raghuram Rajan was absolutely against the move, saying reserves were part of contingency fund held by the central bank.</p>.<p>“They lend strength to make its balance sheet unimpeachable. And, at a time when the government of India wants to borrow from abroad, a strong RBI with AAA rating comes in handy,” according to Rajan.</p>.<p>Besides Jalan, the members of the panel include former deputy governor of RBI Rakesh Mohan as the vice-chairman, finance secretary Subhash Chandra Garg, RBI deputy governor N S Vishwanathan, and two RBI central board members — Bharat Doshi and Sudhir Mankad.</p>
