sns019 ‘Whats al the fuss about RBI's fund transfer? - Redi.com Business News Business Movies Sports Cricket Gel Ahead Money Tips Shopping |S*¥ What is all the fuss about RBI's fund transfer? As far as the Jalan committee recommendation is concerned, the transfer of Rs 52,637 crore is far lower than what analysts were expecting. In fact, the RBI's capital position would still be one of the strongest in the world. Anup Roy answers some frequently asked questions. Illustration: Uttam Ghosh/Rediff.com 776 lakh er transfer not an attack on RBI autonomy’ ‘Winathas happened? The RBI board decided to transfer Rs 123,414 crore of year 2018-19 (F¥19). s surplus, generated in fiscal The RBI follows a July-June year. ‘The central bank has already given the government Rs 28,000 crore as interim dividend, "Banks have to be on their own and raise Why banks don't pass on rate cut benefits capital to customers tps) ref. com/businessspecalvhats-lthe-fuss-aboutls-und ransfori20180819.him 4sns019 ‘Whats all the fuss about RBI's fund transfer? - Redi.com Business News Business Movies Sports Cricket Gel Ahead Money Tips Shopping S*¥" ame Fas The Bimal Jalan Committee on Economic Capital Framework (ECF) has suggested an additional transfer of Rs 52,637 crore of excess provisions. The government will immediately get a net of Rs 148,051 crore. ‘More fom around the web Innovation that help SN Wiho Is tho Richest “Think of RBI as a profit-making oops hears healthy. Person inne? company’ neue we Does rei transfer its surplus every year? Yes, it does. According to the suggestions of a committee headed by Y H Malegam, the RBI has enough capital and should transfer the entire amount to the government as surplus. In the past five years, the RBI did not boost its reserves as such, but transferred the ‘money to the government. Last year, i transferred Rs 50,000 crore. How aia the RB1 earn so much in a slowing global economy? A significant portion of this earning is interest generated from the secondary market bond purchases by the RBI. It bought bonds worth Rs 3 trillion to boost liquidity in the system, So to that extent, the government actualy gets les than Rs 1.48 trillion, India likely to get new Parliament buildingin 2002 Stil itis a significant figure. "Wat does the government do with the money? Itis up to the government. About Rs 70,000 crore can go for bank recapitalisation It can also spend some of the money for stimulus measures. Whatever itis for, the bond market is happy that the government need not float extra bonds for the stimulus and bank recapitalisation. Des the transfer weaken the RBI? Pak’s Kashmir narrative deceitful: India at UN. Not exactly, but it does chip away some of the financial resilience of the central bank. The dividend transfer as such is a moot point, because whatever the RBI earns it transfers, In 2018-19, they must have earned more and so the transfer is more. tps) ref comibusinessspecalvhats-l-the-fuss-aboutls-und ransfori20180819.himsns019 ‘Whats all the fuss about RBI's fund transfer? - Redi.com Business News Business Movies Sports Cricket Gel Ahead Money Tips Shopping S*¥" As far as the Jalan committee recommendation is concerned, the transfer of Rs 52,637 crore is far lower than what analysts were expecting. In fact, the RBI's capital position would still be one of the strongest in the world. Tndia needs a new army -- Waste "Wat aid the Jalan panel recommended exactly? Warriors! ‘The RBI should be its economic capital, which is its contingency fund, plus revaluation reserves, at 20-24.5 per cent of the balance sheet. “After the transfer, this will be 23.3 per cent. Specifically, the panel said the contingency fund, whieh it called “realised equity”, should never be 5.5 per cent to 6.5 per cent. Now, this realised fund is 6.8 per cent. . The RBI board accepted to keep the fund at 5.5 per cent of the balance sheet, freeing ‘The Dream Girl Review up money for transfer. Had they accepted 6.5 per cent as the level for “realised equity”, the transfer would have been Rs 11,608 crore. How much are the contingency fund and revaluation reserves? As of June 2018, the contingeney fund is Rs 2.3 trillion, and revaluation reserves are Rs 6.9 trillion. "Wihsy was money not transferred from the revaluation reserve? This is because the RBI cannot transfer what it has not eared, This money rose from revaluation of its investments. It is a nominal reserve. Monoywiz Livet On the other hand, contingency fund is areal reserve that the RBI built up from its BSE 9709051 777 ooo arias Carmings. NSE 1o97es5 4s sums So, this is digging into past reserves ofthe central bank, which former RBI governor Fer np , D Subbarao and deputy governor Viral Acharya termed as “raiding” the balance Top Gane Wockrard i, 0m) mote» sheet of the RBI Top Loser: Shankara. (7 How witt the transfer take place? Itis a book entry rally ‘There is no hard cash getting eartied to Delhi from Mumbai ‘The RBI is the bank of the government and manages its cash anyway. So the amount is debited from the RBI's books and gets credited to the government's books maintained with the RBI. But like any book entry, the RBI will have to do a careful balancing act. That might have implications, Winn tps) ref comibusinessspecalvhats-l-the-fuss-aboutls-und ransfori20180819.him plications?sns019 ‘Whats all the fuss about RBI's fund transfer? - Redi.com Business News Business Movies Sports Cricket Get Ahead Money Tips Shopping S*¥" iter the transter, the KBI's Hapinty side shrinks, but the asset side remains intact. So, the RBI can sell bonds from its asset side, or some of its other assets to shrink the balance sheet. But that will suck out liquidity from the system, something that the RBI has rectified after a lot of struggle in the recent past. Instead, it ean print more currencies and increase the liability side. So, the currency in circulation increases. "Wat happens if currency in circulation increases? Ifthe currency in circulation is more than the demand, then the eurrency loses its value. That means more inflation, and as the rupee depreciates, import cost also rises and that causes additional inflation, Ata time when the RBI is officially mandated to contain inflation within a specific range, increased currency in circulation works against that goal, Surely, the RBI will have to contain it at some point. ‘uw Roy soe: Bees Staaord ‘SHARE THIS STORY. You Might Also Like India's Richest: 20 People With Innovation thathelp keeps Dubai Villa Prices Fall to The Most Money hearts healthy. See how Lowest Point ina Decade (Fores) labbotin (Mansion Gtoba) Jalal Moroccan Villain an A Modern House With Views of Florida Has More to Discover x Exclusive Community ‘the Ocean in retand ‘Than its Beautiful Beaches. (Mansion (Monson Global) (oousa) tps) ref comibusinessspecalvhats-l-the-fuss-aboutls-und ransfori20180819.himsns019 ‘Whats all the fuss about RBI's fund transfer? - Redi.com Business News Business Movies Sports Cricket Gel Ahead Money Tips Shopping S*¥" EE UES Indians Born Before 1964 Are How To: Relieve Arthritis and 2019's World's Bs Now Elgible To Test Hearing Joint Pain (Oo This Every Day) Universities Revealed Als ita Reports 24 (Fores) (Fan Hoany 247) feconmardesty | See Also Latest 5G Mobile Phone Best SIP Plans 2019 Online Typing Jobs Best Mutual Funds To Invest in Term Life Insurance Plans Free Money Transfer 2019 Work From Home Jobs How to Start an Online Business 2019 Recommended by Rediff.com rt conomies hold 65% Top LeT lerorst gunned down HC seeks CBs response on of $15 tn phantom FD! in Sopore ‘#FoodPorn with Rohan Joshi: Eat everyting, regret nothing tps) redif. com/business/specalvhats-lthe-fuss-aboutois-und ransfori20180819.him