RBI to transfer Rs52,679 crore surplus profit to government - Moneylife

RBI to transfer Rs52,679 crore surplus profit to government - Moneylife

year RBI has chosen to transfer  almost the
entire surplus to government, according to reports. It is also reported that
the gesture to support GOI is persuant to a recommendation made by a panel
headed by one of its directors Y H Malegam.
The pressure on RBI to reduce its reserves and  pass on the proceeds to Consolidated Fund of
India was not new. Immediately, one has no access to the basis on which the
Malegam Panel has certified the adequacy of the central bank’s reserves  for the coming three years. Long back, after
internal assessment, it was decided by RBI to target maintaining reserves at 12
per cent of the size of the balance sheet and till last year that was the

so far has been  to give residual surplus
after appropriation to central bank’s reserves.
Just as ‘people get the government they deserve’,
GOI and RBI can get the recommendations they ‘need’ from panels. RBI is already
struggling to come out of a situation created by one such report. Yes, the
reference is to the report of the Financial Sector Legislative Reforms
Commission authored by Justice Srikrishna. This is not just a premature, harsh
response to the beginning of the gradual weakening of a central bank’s
financial strength. Lamenting on the fall of RBI’s aggregate reserves from 11.9
per cent of balance sheet size to 10.1 per cent during the five year period
ending June 2013, I had observed asunder:
“To ensure
that temptations of government emanating from external compulsions do not
dilute the strength of RBI’s balance sheet, GOI should take measures to augment
the share capital and reserves of RBI after carrying out appropriate amendment
to RBI Act. Till such time RBI should be allowed to retain surplus income by
transfer to reserves. Considering the size of the balance sheet and the
internal and external pressures on its income generating capabilities, as also
the nature of shocks the bank has to absorb from time to time, the central
bank’s reserves need to be augmented on an ongoing basis.”*
*Page 47,
Banking, Reforms & Corruption: Development Issues in 21st
Century India By M G Warrier(
Warrier, Mumbai


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