New Delhi: Ending the decade-long conflict between the central government and Reserve Bank of India (RBI), the banking regulator has accepted the recommendations made by the Bimal Jalam Committee. As a result, the RBI will transfer Rs1.76 lakh crore for the 2019-20 financial year to the Centre, which is the only shareholder of its profits to be disbursed.
However, it’s still less than what the policymakers are expecting. The central government was expecting a transfer of Rs 3 lakh crore from the RBI in addition to seeking a revaluation of reserves with the regulator as well.
The Prime Minister Narendra Modi-led NDA government won and the RBI settled to the Bimal Jalan committee report which has ended the decade-old attritional war that saw a Governor being scalped.
RBI in its statement said, “The surplus transfer includes Rs 1,23,414 crore in surplus for the year 2018-19 (of which Rs 28,000 crore has already been paid as interim dividend), 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.”
The Mint Street after its board meeting on Monday announced that it would transfer a surplus of a little over Rs 1.76 lakh crore to the government. The payout comprises of Rs1.23 lakh cr of surplus and Rs 52,637cr of excess provisions lying with the central bank.
On the other hand, experts say that the RBI Act clearly states: “The Central Government may from time to time give such directions to the bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest. Subject to any such directions, the general superintendence and direction of the affairs and business of the Bank shall be entrusted to a Central Board of Directors which may exercise all powers and do all acts and things which may be exercised or done by the Bank.” This indicates that the RBI has to be subservient to the government.
This is partly over the RBI annual dividend that is given to the government. Last financial year, with an interim transfer of Rs 28,000 crore in February this year, the government got a total Rs 68,000 crore from the central bank. The RBI had transferred Rs 40,000 crore to the government in August 2018. This was the highest receipt from RBI in a single financial year for the government, exceeding the Rs 65,896 crore it received in FY16 and Rs 40,659 crore in FY18.
In July, before his abrupt removal as finance secretary, SC Garg said the government expects Rs 90,000 crore as dividend from the RBI in the current fiscal 2019-2020. Differences of opinion over this vexed issue led to RBI Governor Urjit Patel resigning and the Bimal Jalan committee being formed on the transfer of surplus. It also saw ex-DEA secretary, Shaktikanta Das, being sent to RBI Mumbai's 18th Floor corner office. The surplus transfer was finalised in keeping with the recommendations of the same panel, headed by former RBI Governor and later Rajya Sabha member Bimal Jalan.