RBI won’t transfer past reserves for now

RBI won’t transfer past reserves for now
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Mumbai, Feb 11: The Reserve Bank of India (RBI) will not immediately transfer surplus capital, which is set aside as reserves over the years, to the government. The central bank audit committee has, however, cleared an interim dividend of Rs 28,000 crore based on a limited audit for the current year and the same is likely to be declared after the central bank’s board meeting on February 18.
The demand to transfer capital surplus was made by the Centre after its attempts to get the RBI to part with what was described “excess reserves” was turned down and the issue of capital framework was referred to a committee under Bimal Jalan. The government had argued that the central bank had more reserves than many of its peers.
The latest move by the department of economic affairs is part of a series of demands on regulators, including Sebi, which market players are seeing as “over-reach” by the government, especially after it pushed Urjit Patel to resign as RBI governor amid the threat of issuing a directive to the banking regulator.
Following the interim Budget, economic affairs secretary Subhash Chandra Garg, who is seen to be driving the offensive against the regulators, had said that the government is expecting a Rs 28,000 crore interim dividend from RBI.
This was in addition to the Rs 40,000 crore surplus already paid out by the central bank last year. The Jalan committee, which will decide on the appropriate level of reserves for RBI, is expected to submit its report by March 31. The concern in RBI is that the transfer of earlier year’s transfer to reserves, without the Jalan committee’s recommendation, is inappropriate.