Jalan Panel still working on report, to meet on June 13: Garg

Last Updated: Fri, May 31, 2019 10:05 hrs
Bimal Jalan

New Delhi: The Bimal Jalan panel, set up to decide the appropriate capital reserves for the RBI, will hold its next meeting on June 13, Finance Secretary Subhash Chandra Garg said here on Friday.

"The Jalan panel will meet next on June 13," Garg said here at an industry event. He was one of the members of the six-member Jalan Committee.

Earlier in the day at another event he had said the panel had sought three-months extension and was still working on the report.

The six-member Jalan panel was appointed on December 26, 2018 to review the Economic Capital Framework for the Reserve Bank of India. It was set up to decide the appropriate capital reserves that the central bank should maintain.

"The report is not finalised yet. More meetings will take place. The (Economic Capital Framework) panel is expected to finalise its report by May-June," Jalan had said after an April 24 meeting.

He had also said the panel has got an extension beyond its three-month term. The Committee was to submit its report in 90 days from the first day of its meeting, which was held on January 8.

It was set up to decide the appropriate capital reserves that the central bank should maintain.

Official sources have told IANS that the mandate of the panel is only for deciding the quantum and the formula of transfer not suggest where and how the surplus is to be used which is a government prerogative.

Transfer of capital had emerged as one of the flashpoints between the RBI and government in the last few months, with the former stating that such demands could jeopardise financial stability. This is believed to be one of the reasons why Urjit Patel stepped down as RBI Governor on December 10 though the government and the RBI said it was due to personal reasons.

The central bank's core reserve -- contingency fund -- is only around 7 per cent of its total assets and the rest of it is largely in revaluation reserves which fluctuate with corresponding changes in currency and gold valuations.

In 2017-18, the central bank's contingency funds and revaluation reserves stood at Rs 2.32 lakh crore and Rs 6.92 lakh crore respectively.

RBI data shows that the growth in revaluation reserves has far exceeded the growth in contingency fund. Though the Ministry has not stated, it is believed that the Finance Ministry was seeking to transfer a surplus of Rs 3.6 lakh crore, more than a third of the total Rs 9.59 lakh crore reserves of the central bank, to the government.

While revaluation reserves have more than tripled from Rs 1.99 lakh crore in 2008-09 to Rs 6.92 lakh crore in 2017-18, the contingency fund has grown 50 per cent in the same period from Rs 1.53 lakh crore to Rs 2.32 lakh crore.

As per the terms of reference of the expert committee, it would review status, need and justification of various provisions, reserves and buffers presently provided for by the RBI and review global best practices followed by the central banks in making assessment and provisions for risks which central bank balance sheets are subject to.

The committee will propose a suitable profits distribution policy taking into account all the likely situations of the RBI, including the situations of holding more provisions than required and the RBI holding less provisions than required. It can also take up any other related matter, including treatment of surplus reserves, created out of realised gains, if determined to be held.

As per the 2016-17 Economic Survey, equity at about 27 per cent of the RBI's Balance Sheet was the fourth highest among the global central banks.

"There is no particular reason why this extra capital should be kept with the RBI. Even at current levels, the RBI is already exceptionally highly capitalised. In fact, it is one of the most highly capitalized central banks in the world," said the Survey.