RBI Buries the Ghost of Bimal Jalan Committee on Economic Capital Framework of RBI
RBI Buries the Ghost of Bimal Jalan Committee Transfers More than 100% of the Surplus to Government SUBHASH CHANDRA GARG Economic, Financial and Fiscal Policy Strategist; Former Finance and Economic Affairs Secretary, Government of India Introduction Bimal Jalan’s Committee, constituted in 2019 to examine the capital framework of RBI, had made essentially two recommendations. One, maintain the valuation reserves/buffer (difference between market and book value of domestic and foreign assets) at about 16-18% of the total RBI assets (the actual number comes out of an unnecessarily complex formula relating to value at risk, confidence level etc.). Second, keep the realised reserves (actual surplus retained by RBI) between 5.5% to 6.5% of the total assets. RBI’s total assets or the size of balance-sheet are made up of two assets- domestic securities and foreign currency assets, including gold, which the RBI acquired and holds. RBI, Jalan Committee mandat...