Bimal Jalan panel to suggest transfer of RBI capital in phases

New Delhi: The Bimal Jalan panel constitute to assess the size of capital reserves maintained by the Reserve Bank of India is believed to have finalised its report, sources said on Wednesday. According to the sources, the recommendations have been "more or less" finalised and the panel will recommend transferring RBI's surplus capital in a phased manner.

"We have discussed everything. Now it is the final report. It would be difficult to tell what is the exact amount of transfer or the calculation. Transfer would be in phased manner as is the practice," the sources said. The report is expected to be submitted to the RBI in the next few days, they added.

The background of the panel

The six-member panel, under former RBI Governor Jalan, was constituted on December 26 to review the economic capital framework (ECF) for the RBI. It was done primarily because the finance ministry wanted the central bank to transfer more surplus to the government to enable to Centre to meet its fiscal deficit target.

According to various estimates, the RBI has over Rs 9 trillion of surplus capital with it.

The panel's term was extended after former Economic Affairs Secretary Subhash Chandra Garg was transferred to the Power Ministry. The transfer was announced when the panel was in the midst of finalising the report. The vacancy was then filled by newly appointed Finance Secretary Rajiv Kumar.

Why does the government need this money?

The Centre has set a fiscal deficit target of 3.3 percent of the gross domestic product (GDP) in financial year 2019-20, after having downgraded it from 3.4 percent that was pegged in the Union Budget in July.

The surplus capital transfer from RBI, and the Rs 90,000 crore that the government is aiming to raise as dividend from the RBI in the current financial year as against Rs 68,000 crore received last fiscal will help the Centre in meeting the fiscal deficit target.