Current context: RBI to transfer Rs1.76 Lakh crore to Government of India under ‘Surplus Distribution Policy’ that include interim dividend of Rs28,000 crores paid on February 2019.
- Surplus distribution policy was recommended by the Bimal Jalan committee which was formed by RBI to review its economic capital framework and suggest the quantum of excess provision to be transferred to the Government of India.
- RBI board accepted all recommendation of Bimal Jalan Committee.
- Committee distinct 2 components of economic capital
- Realised equity: it could be used for meeting all risks or losses which were primarily build up from retained earning.
- Revaluation balances: this is risk buffer against market risk as they represent unrealised valuation gains and hence were not distributable.
- Keeping in mind about financial and external stability risks in the country’s savings for a ‘rainy day’, the committee has recommended to maintain 6.5% to 5.5% the RBI’s balance sheet (of which 5.5% to 4.5% for monetary and financial stability risks & 1% for credit and operational risks).
