The Bimal Jalan-led panel on the Reserve Bank of India’s (RBI’s) economic capital framework (ECF) has 'almost finalised' its report, a senior government official said.
The panel, headed by the former RBI governor, will not meet again, the official said. “Recommendations such as phased transfer of RBI (Reserve Bank of India) reserves to government in 3-5 years stays,” the official said.
The report will be submitted to RBI in the next few days. “We have discussed everything. Now will be the final report,” the official said.
Former finance secretary Subhash Chandra Garg had submitted a dissent note. There were differences within the panel, as Garg was believed to have favoured a one-time transfer of surplus reserves instead of a staggered one.
"I don't want to speak on that. He's no more there," the official said, on being asked if Garg's dissent note would be carried in the final report.
The official refused to disclose the exact amount of transfer or the method of calculation used. “Transfer would be in phased manner as is the practice,” the official said.
The government expects to meet its fiscal deficit target through the transfer of surplus capital. Finance minister Nirmala Sitharaman has narrowed the budget deficit target for 2019-20 to 3.3 percent of gross domestic product in the July budget, from 3.4 percent set in February’s interim budget.
Sitharaman has budgeted to receive Rs 1.06 trillion this fiscal from RBI through dividends.
The government's position on the transfer of funds has been that the RBI is sitting on huge reserves and is being too conservative in transfers. Since it has more funds, it should be transferred to the government for more productive use, the government believes.
The committee on ECF was set up by the central bank in December 2018 and was expected to submit its report within 90 days from the date of its first meeting. Garg, Bimal Jalan, former RBI Deputy Governer Rakesh Mohan, directors of RBI's central board Bharat Doshi and Sudhir Makand, and RBI Deputy Governor NS Vishwanathan are part of the panel.
The panel was formed at a time when the government and the central bank were involved in differences of opinion on the issue of RBI’s surplus transfer to the government.
The controversy over the transfer of surplus reserves started when it was reported that the government was seeking Rs 3.6 lakh crore from RBI. The government then said that it was only discussing a proposal to fix an appropriate "economic" capital framework for the central bank.
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