RBI to transfer funds to GOI

Accepting the recommendations of the Bimal Jalan Panal on Economic Capital Framework to determine the optimal level of reserves that RBI should hold, RBI has agreed to transfer a sum of Rs. 1.76 lakh cr to government. The amount comprises of RS.123,414 cr as dividends and Rs. 52,637 Cr as excess provision. Earlier, RBI was expected to transfer only RS. 66,000 cr to the Centre. The surplus being transferred is the largest transfer in the history of RBI.

The huge sum was earned through Rupee intervention and RBI’s open market operations. Apart from the transfer, the panel has accepted covering of 99.5% of RBI’s market risks and also agreed to have a contingent risk buffer pegged at 5.5-6.5% of size of RBI’s balance sheet against monetary and financial stability crisis. The transfer of surplus reserves has been a matter of contention between RBI and Govt in past few months.