The Reserve Bank of India (RBI) August 27 released the report compiled by an expert committee headed by Bimal Jalan, formed to review the Economic Capital Framework of the Central Bank.
"The Committee noted that while there may occasionally arise a difference of views in the conduct of the central bank’s operations, there always needs to be harmony in the objectives of the Government and the RBI," the panel noted in the report.
Some of the recommendations of the committee included maintaining the RBI’s Contingency Risk Buffer (CRB), which is the country’s fund to handle a financial stability, to be maintained at a range of 5.5 percent to 6.5 percent of the RBI’s balance sheet, which is above the available level of 2.4 percent of balance sheet as on June 30, 2018.
"Application of these recommendations to RBI’s 2017-18 balance sheet is seen to result in RBI’s risk equity levels in a range of 25.4 per cent to 20.8 per cent of the balance sheet which will enable the RBI to retain one of the highest levels of financial resilience among central banks globally," according to the report.
The report recommended a review of the Economic Capital Framework every five years. However, in case of a significant change in the RBI’s risks and operating environment, an intermediate review may be considered. It suggested that an interim dividend to the government must only be made in exceptional circumstances.
The committee recommended a more transparent presentation of the RBI’s annual accounts with regard to the components of economic capital, on the lines as mentioned in the table:
Source: moneycontrol.com