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RBI Central Board Approves Surplus Transfer

Thu 29 Aug, 2019

The central board of the Reserve Bank of India (RBI) decided to transfer a surplus of Rs 1.76 lakh crore to the Central Government acting on the recommendations of a committee chaired by former RBI governor Bimal Jalan, on capital transfer.

Background

  • RBI, in consultation with the Government of India, had constituted an Expert Committee to Review the Extant Economic Capital Framework of the Reserve Bank of India (Chairman: Dr. Bimal Jalan).

Major Recommendations

  • A clearer distinction between the two components of economic capital (realized equity and revaluation balances).
  • RBI’s capital framework be reviewed every five years and its accounting year (July-June) be aligned with the fiscal year that ends on 31 March.
  • A surplus distribution policy which targets the level of realized equity to be maintained by RBI within the overall level of its economic capital.
  • RBI’s contingency fund for meeting all risks/losses should be in the range of 6.5-5.5% of the balance sheet.