Bimal Jalan Committee Proposals Accepted; Surplus Transfer to Govt
Image Source: Shutterstock

The Reserve Bank of India has released the Jalan Panel Report on 26 August 2019. The report concerns itself with the review of the economic capital framework. One of the major recommendations of the report is to transfer a sum of Rs.1,76,051 crore to the Government of India.

This amount comprises of a surplus of Rs.1,23,414 crore for the year 2018-19 plus the excess provisions of Rs.52, 637 identified as per the revised Economic Capital Framework (ECF). 

The panel has suggested that RBI’s capital can be categorised under two heads —revaluation reserves and contingency reserves. However, revaluation reserves cannot be distributed as capital; they are not realised gains. Only contingency reserves can be treated as capital.

Also Read: Link lending rates of loans to repo rates, says RBI to lenders

Further, the ideal value of contingency reserves was recommended to be between 5.5% and 6.5% of the total balance sheet as per RBI’s calculation. In that case, the excess reserves will fall in between Rs.26,280 crore and Rs.62,456 crore. The mid-value of this range, Rs.52,630 crore, is chosen as the excess capital by the RBI board.

Among the other major recommendations, the Jalan committee suggested changing RBI’s financial year in line with that of the government. The recommendation was made to clear the never-ending confusion of which year’s RBI money is going to which year’s government money.

The report also stated that the interim dividend should not be considered as a set rule. These funds must be used at the time of exceptional crisis. It added that the recommendations must be reviewed once every five years to keep it up-to-date.

The basis for the recommendations is the fact that the RBI forms the primary bulwark for monetary, financial, and external stability. RBI needs to be resilient enough to keep up with the public policy objectives of central banks of other developed nations.

You May Also Like

Taxation of dividend income received on or after 1 April 2020 (FY 2020-21)

You may receive a dividend from your equity or mutual fund investments.…

Know the taxation rules for income F&O trading

Futures and options are stock derivatives that are traded in the stock…

Important Cash Transaction Limits and Penalties Under Income Tax That You Need to Know About

In India, there are a lot of transactions that go unaccounted for,…
Gold Jewellery

24K Gold Rate in India for November 2019: Week 4

The fourth week began with the gold rate in India holding at…