MANU/RPRL/0156/2019

Ministry : Reserve Bank of India

Department/Board : RBI

Press Release No. : 2019-2020/531

Date : 26.08.2019

RBI Central Board accepts Bimal Jalan Committee recommendations and approves surplus transfer to the Government

The Central Board of the Reserve Bank of India (RBI) today decided to transfer a sum of `1,76,051 crore to the Government of India (Government) comprising of `1,23,414 crore of surplus for the year 2018-19 and `52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at the meeting of the Central Board today.

2. It may be recalled that the RBI, in consultation with the Government of India, had constituted an Expert Committee to Review the Extant Economic Capital Framework of the Reserve Bank of India (Chairman: Dr. Bimal Jalan). The Committee has since submitted its report to the Governor of the RBI. The Committee's recommendations were based on the consideration of the role of central banks' financial resilience, cross-country practices, statutory provisions and the impact of the RBI's public policy mandate and operating environment on its balance sheet and the risks involved.

3. The Committee's recommendations were guided by the fact that the RBI forms the primary bulwark for monetary, financial and external stability. Hence, the resilience of the RBI needs to be commensurate with its public policy objectives and must be maintained above the level of peer central banks as would be expected of a central bank of one of the fastest growing large economies of the world.

4. Major recommendations of the Committee with regard to risk provisioning and surplus distribution

(i) RBI's economic capital: The Committee reviewed the status, need and justification of the various reserves, risk provisions and risk buffers maintained by the RBI and recommended their continuance. A clearer distinction between the two components of economic capital (realized equity and revaluation balances) was also recommended by the Committee as realized equity could be used for meeting all risks/losses as they were primarily built up from retained earnings, while revaluation balances could be reckoned only as risk buffers against market risks as they represented unrealized valuation gains and hence were not distributable. Further, there was only a one-way fungibility between them which implies that while a shortfall, if any, in revaluation balance........