RBI's capital woes: Jalan Panel has a tough job in hand




My response:

December 31, 2018
RBI’s capital woes
This refers to the interesting report “RBI Decides Not to Touch Valuation Gain” by Sugatha Ghosh (ET, December 31). This may temporarily dampen the inflated expectations of Finance Ministry emanating from the fallacious estimates of RBI’s reserves in Economic Survey 2016-17. This may make the ECF Panel’s job tougher, as the Jalan Panel has already been dubbed ‘fund transfer committee’ by a section of the media.
Jalan Panel’s task will now hover around:
(a)     Arriving at the amount of share capital RBI should have. RBI’s share capital has remained static at Rs 50 million since inception (1935). This may have to be raised to a decent level, say well above the equivalent of  $500 billion.
(b)    To consider whether RBI should create a ‘Capital Protection Fund’ to insulate its capital from erosion in value.
(c)     Revisiting the existing target for RBI’s reserves (Contingency Fund plus Asset Development Fund) which was set at 12 percent of assets years back (this was almost touched a decade back, but now come down to 7 percent!)
(d)    Suggesting source of funds for (a)
M G WARRIER, Mumbai

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