RBI's Accounts II

Re: Letters to BS: Govt must reciprocate by helping RBI to augment its reserves

I gave this explanation to a response I received* this morning:

"I have learnt to "negotiate" from the trade union leaders of 1960's. Ask for the imposible. Management will come back with possible options other than what is demanded. Then, go for the best.
Here, I have been pestering Jalan and Rakesh Mohan to recommend enhancement of share capital to $200 to 400 billion. As BRICS bank's capital was $200 billion, they couldn't ask for rationale. They have protected reserves at present levels. I congratulated them.
*Response from CV Subbaraman, Mysuru:
The need for augmenting the Capital of RBI which stands at a mere Rs.5 crore since inception, despite the stupendously rising balance sheet total, is understandable. But if the capital has to be raised in real terms, and not by "capitalising the reserves" - reserves of whatever nature - it has to come from the Treasury and where is the money with the Treasury which has been demanding higher and higher dividends from RBI?! Capitalising any portion of any reserves does not improve the net worth of the Bank.


Subject: Letters to BS: Govt must reciprocate by helping RBI to augment its reserves
In response to Shri Venugopal's mail:

I read your response on the subject in group mail.
Jalan Panel has done whatever was possible in the given circumstances to protect national interest which includes having a central bank with a strong balance sheet. I pity the responses from certain quarters without even going through the ECF Panel report which has been accepted by RBI.

M G Warrier


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