Conflicts on the Optimal Umbrella Size - the Issue of RBI Fund transfer
The six-member panel under former RBI Governor Jalan was appointed on December 26, 2018, to review the economic capital framework (ECF) for the RBI after the Finance Ministry asked the Central Bank to transfer more surplus to the government from its excess reserves (Livemint 2019). As per the estimates, the RBI has over Rs. 9 lakh crore of surplus capital with it (Livemint 2019). Besides surplus capital transfer, the government is expecting Rs. 90,000 crore dividend from the RBI in the current financial year as against Rs. 68,000 crore received in the previous year (Livemint 2019). The finance ministry is of the view that the surplus of 28% of gross assets maintained by the RBI is well above 14% as per the global norms. The government thus believes that the RBI is being too conservative and is sitting over a huge pool which could be used by the government and will assist in reducing and constricting the fiscal deficit to 3.3% of GDP (reduced from 3.4% of the GDP set in February’s