Govt likely to use RBI surplus to clear bills

Mumbai, June 25 

The Bimal Jalan committee report, which is delayed, will lead to transfer of under Rs 3 lakh crore of excess capital from the Reserve Bank to the government, which will most likely use the money for meeting regular expenses, says a report.

The money will come in over three years and is most likely used for regular government spending, Japanese brokerage Nomura said in a report on Tuesday.

The Bimal Jalan committee on the appropriate economic capital framework for the RBI was formed last December. It has sought a third extension to present its report which will now be next month.

“Market expectations suggest Rs 3 lakh crore (will be) distributed staggered over years, though we believe the ultimate transfer will be lower,” the brokerage said.

It said there is a 45 per cent probability for the money to be used for regular government spending and only 20 per cent chance that it will be used for bank recapitalisation.

Recouping state-run banks’ capital buffers which have taken a beating due to the dud asset recognition is one of the most talked about uses for the excess RBI capital and is also backed for former chief economic advisor Arvind Subramaniam.

Nomura gave a higher, 25 per cent probability for the money to be used for retiring public debt with the RBI, and a 10 per cent probability of no immediate transfer at all.

“The evaluation of ‘excess’ depends on the choice of stress-testing, and ranges from the RBI being under-capitalised to an excess as high as Rs 4.5 lakh crore,” it said, speaking about the ways of computing. It, however, said those expecting a large fiscal windfall of Rs 3 lakh crore are “at a risk of being disappointed”.

The Jalan panel is entrusted with the task of reviewing the best practices followed by Central banks worldwide in making assessment and provisions for risks. — PTI

At loggerheads

• The government and the RBI during the tenure of previous Governor Urjit Patel had been at loggerheads over the surplus capital with the Central bank, and formation of the panel was among the first major decision taken by Patel’s successor Shaktikanta Das
• The Finance Ministry was of the view that the buffer of 28 per cent of gross assets maintained by the Central bank is well above the global norm of around 14 per cent

Jalan panel defers report submission

The Bimal Jalan committee, entrusted with the task of reviewing the best practices followed by Central banks worldwide in making assessment and provisions for risks, has again deferred its report submission till the Budget next month. The six-member committee, under former RBI Governor Jalan, was formed on December 26, 2018. It has now sought a third extension to present its report.