Centre may use RBI surplus to tackle fiscal deficit 

File photo: The Reserve Bank of India. Photograph:( Zee News Network )

WION New Delhi Jul 18, 2019, 02.13 PM (IST)

A high-level committee set up by the Reserve Bank of India (RBI) on its Economic Capital Framework (ECF) has recommended that surplus reserves held by the central bank be transferred to the government in tranches over three to five years, according to published reports.

As of today, RBI sits on a reserve of 9.6 lakh crore.

The six-member committee which took this decision was headed by former RBI governor Bimal Jalan who was tasked with examining the Central Bank’s requirements on provisions, reserve and buffer. Finance ministry has maintained that 28 per cent gross assets maintained by the central is well above the global norm of 14 per cent.

The committee is expected to submit its final report to the RBI in next 15 days. A large share of RBI’s income stems from interest earned on foreign reserves invested overseas and that on securities in India.

Any extra capital will help the government meet the fiscal deficit target for the current year, which has been set at 3.3 per cent of the gross domestic product (GDP).

The six-member panel was set up on December 26, 2018. The panel has been further entrusted with the task of reviewing the best practices followed by central banks worldwide in making assessments and provisions for risks.

The government had invoked powers under rarely used section 7 of the RBI Act in October, seeking consultations with the central bank on 12 points, including the ECF.