RBI accepts Bimal Jalan Committee recommendations, approves Rs. 1.76 lakh crore to Govt
Recommendations of the Bimal Jalan Committee were guided by the fact that the RBI forms the primary bulwark for monetary, financial and external stability.
The Reserve Bank of India (RBI) has decided to transfer a sum of Rs. 1,76,051 crore to the Government of India as per the recommendations made by Bimal Jalan Committee. The surplus money includes a sum of Rs. 1,23,414 crore for the year 2018-19 and Rs. 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at the meeting of the Central Board.
Recommendations of the Bimal Jalan Committee were guided by the fact that the RBI forms the primary bulwark for monetary, financial and external stability. This latest move of the central bank will provide flexibility to the RBI to match with its public policy objectives. It would maintain above the level coordination with peer central banks as one of the fastest-growing large economies of the world.
Committee Recommended Surplus Distribution Policy
The six members Bimal Jalan Committee has made a recommendation to constitute a surplus distribution policy which will target the level of realized equity to be maintained by the RBI. According to the recommendations, if the committee will found equity is above its requirement, will the entire net income be transferable to the Government. On the other hand, if it will be below the lower bound of requirement, the government will apply risk provisions to the extent necessary and only the residual net income (if any) transferred to the Government.
Rs 95,414 Cr dividend to Govt.
RBI has been giving 99% of its disposable income to the government since the 2013-14. As far as the dividend is concerned, out of Rs 1,23,414 crore for 2018-19, 28,000 crore rupees have been given to the government as interim dividend in March itself. The government is set to get a dividend of Rs 95,414 crore during the current financial year. This will be in addition to a surplus fund of 1.76 lakh crore.
Benefits to the Banks
The government will be able to help the banks with this fund. Union Finance Minister Nirmala Sitharaman has already announced a capital infusion of Rs 70 thousand crores in public sector banks, which is expected to fetch Rs 5 lakh crore in the market. The government had proposed a dividend of Rs 90,000 crore for the Reserve Bank in the budget, while in the last financial year, RBI paid Rs 68,000 crore as a dividend.
Bimal Jalan was appointed as the head of the six-member panel on December 26, 2018. Other members of the committee headed by Bimal Jalan includes- Former deputy governor of RBI - Rakesh Mohan as vice-chairman, Finance secretary - Subhash Chandra Garg as a member, RBI deputy governor N S Vishwanathan as member and RBI’s central board members - Bharat Doshi and Sudhir Mankad as members.