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<ul><li>The Bimal Jalan panel, set up to decide the appropriate capital reserves for the RBI, may recommend transfer of surplus to the government.</li><li>The six-member Jalan panel will recommend the appropriate capital reserves that the central bank should maintain.</li><li>Former RBI governor Urjit Patel reportedly quit after opposing the government's proposal to extract a big chunk of the reserves.</li></ul> The Narendra Modi government has had its eyes on the surplus reserves of the Reserve Bank Of India (RBI) for some time now. But its attempts have been stalled, most famously by the central bank's former governor Urjit Patel, who ended up resigning from his position before his term ended. But Modi has come back stronger, and the Bimal Jalan Committee may recommend that the RBI must transfer the surplus money back to the government, according to a Reuters report citing a source. The Bimal Jalan panel, set up to decide the appropriate level of capital reserves for the RBI, has reportedly recommended that the Indian central bank must transfer the money not at once but over the next 3-4 years. The recommended quantum of transfer is not clear yet. The mandate of the panel is only for deciding the quantum and the formula of transfer not suggest where and how the surplus is to be used which is a government prerogative, according to an IANS report in June citing sources. Modi's rivals have been critical of the proposal and have called out the government for trying to use RBI's money for fiscal excesses. The <a href="https://www.businesstoday.in/current/economy-politics/here-is-what-economists-have-to-say-on-rbi-surplus-transfer-to-govt/story/292330.html" data-type="tilCustomLink" target="_blank">country's economists have been divided</a> over the issue. The central bank's core reserve -- contingency fund -- is only around 7% of its total assets and the rest of it is largely in revaluation reserves which fluctuate with corresponding changes in currency and gold valuations. In 2017-18, the central bank's contingency funds and revaluation reserves stood at ₹2.32 trillion and ₹6.92 trillion respectively. RBI data shows that the growth in revaluation reserves has far exceeded the growth in contingency fund. Though the Ministry has not stated, it is believed that the Finance Ministry was seeking to transfer a surplus of ₹3.6 lakh crore, more than a third of the total ₹9.59 lakh crore reserves of the central bank, to the government. While revaluation reserves have more than tripled from ₹ 1.99 trillion in 2008-09 to ₹6.92 trillion in 2017-18, the contingency fund has grown 50% in the same period from ₹1.53 trillion to ₹2.32 trillion. As per the 2016-17 Economic Survey, equity at about 27% of the RBI's balance sheet was the fourth highest among the global central banks. As of now, the RBI Act does not specify the amount to be transferred to the government and there is no consensus on the right level of capital for a central bank. "There is no particular reason why this extra capital should be kept with the RBI. Even at current levels, the RBI is already exceptionally highly capitalised. In fact, it is one of the most highly capitalized central banks in the world," said the Survey. SEE ALSO: <a href="https://www.youtube.com/watch?v=Kd75yZqHQGk" data-type="tilCustomLink" target="_blank">Time for RBI to do 'whatever it takes' to save India's financial sector: Vallabh Bhanshali</a>

RBI may be asked to give a part of its surplus to the government every year: Report

<ul><li>The Bimal Jalan panel, set up to decide the appropriate capital reserves for the RBI, will hold its next meeting on June 13.</li><li>The six-member Jalan panel will recommend the appropriate capital reserves that the central bank should maintain.</li><li>Former RBI governor Urjit Patel reportedly quit after opposing the government's proposal to extract a big chunk of the reserves.</li></ul> The Narendra Modi government has had its eyes on the surplus reserves of the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank Of India</keyword> (RBI) for some time now. But its attempts have been stalled, most famously by the central bank's former governor Urjit Patel, who ended up resigning from his position before his term ended. But Modi has come back stronger, and as Nirmala Sitharaman takes charge of the Finance Ministry, one of the first debates to spring up after she assumes may be a tough one-- should the government tap into RBI's surplus reserves? Waiting for Jalan The Bimal Jalan panel, set up to decide the appropriate level of capital reserves for the RBI, will hold its next meeting on June 13, according to Finance Secretary Subhash Chandra Garg who is one of the members of the six-member Jalan Committee. Earlier in the day, at another event, Garg had said the panel had sought three-months extension and was still working on the report. The head of the panel, Jalan, had said in April that the report may be finalised by May or June. The mandate of the panel is only for deciding the quantum and the formula of transfer not suggest where and how the surplus is to be used which is a government prerogative, according to an IANS report citing sources. Modi's rivals have been critical of the proposal and have called out the government for trying to use RBI's money for fiscal excesses. The <a href="https://www.businesstoday.in/current/economy-politics/here-is-what-economists-have-to-say-on-rbi-surplus-transfer-to-govt/story/292330.html" data-type="tilCustomLink" target="_blank">country's economists have been divided</a> over the issue. The central bank's core reserve -- contingency fund -- is only around 7% of its total assets and the rest of it is largely in revaluation reserves which fluctuate with corresponding changes in currency and gold valuations. In 2017-18, the central bank's contingency funds and revaluation reserves stood at ₹2.32 trillion and ₹6.92 trillion respectively. RBI data shows that the growth in revaluation reserves has far exceeded the growth in contingency fund. Though the Ministry has not stated, it is believed that the Finance Ministry was seeking to transfer a surplus of ₹3.6 lakh crore, more than a third of the total ₹9.59 lakh crore reserves of the central bank, to the government. While revaluation reserves have more than tripled from ₹ 1.99 trillion in 2008-09 to ₹6.92 trillion in 2017-18, the contingency fund has grown 50% in the same period from ₹1.53 trillion to ₹2.32 trillion. As per the 2016-17 Economic Survey, equity at about 27% of the RBI's balance sheet was the fourth highest among the global central banks. As of now, the RBI Act does not specify the amount to be transferred to the government and there is no consensus on the right level of capital for a central bank. "There is no particular reason why this extra capital should be kept with the RBI. Even at current levels, the RBI is already exceptionally highly capitalised. In fact, it is one of the most highly capitalized central banks in the world," said the Survey. With inputs from IANS SEE ALSO: <a href="https://www.businessinsider.in/rbi-pays-interim-dividend-central-government/articleshow/68057230.cms" data-type="tilCustomLink" target="_blank">The Modi administration’s overspending gets rewarded with an interim dividend from the central bank</a>

A bitter debate may hound Finance Minister Nirmala Sitharaman in the first fortnight-- what to do with RBI's surplus reserves

(Photo Source : flickr.com) <ul><li>The Indian government is said to be considering <keyword id="6354424" type="COMPANY" weightage="20" keywordseo="world-bank">World Bank</keyword> lead economist <keyword id="172342" type="PERSON" weightage="20" keywordseo="Poonam-Gupta">Poonam Gupta</keyword> for the role of Chief Economic Advisor (CEA). </li><li>The position became vacant after <keyword id="6355547" type="PERSON" weightage="20" keywordseo="arvind-subramanian">Arvind Subramanian</keyword> left the role months before his term was to expire . </li><li>A government search committee is said to be looking at other candidates as well. </li></ul> The Indian government is said to be considering World Bank Lead Economist Poonam Gupta to fill the role of Chief Economic Advisor (CEA), Economic Times reported. If confirmed, Gupta would become the first woman to hold the position. Prior to joining World Bank in 2013, Gupta was <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank Of India</keyword> Chair Professor at National Institute of Public Finance and Policy. The government’s search committee is also said to be considering other names including Sajjid Chinoy, chief India economist at JPMorgan, and Krishnamurthy Subramanian, a professor at the Indian School of Business. India is seeking to fill the position after the abrupt resignation of Arvind Subramanian who left several months before his tenure as the government’s Chief Economic Advisor was to expire. Subramanian reportedly left because of “<a href="https://www.facebook.com/notes/arun-jaitley/thank-you-arvind/804077679780782/">pressing family commitments</a>.” He had been appointed as the CEA to the India’s finance ministry in October 2014. Even though there are only six months remaining for the upcoming general elections, the Indian government has been looking for a ‘fresh face’ to seek expert advice amid global turmoil, according to the report. The Finance Ministry <a href="https://economictimes.indiatimes.com/news/economy/policy/government-likely-to-appoint-new-chief-economic-advisor-in-next-1-2-months/articleshow/66281908.cms">appointed</a> a search committee in October headed by former Reserve <keyword id="6355303" type="DOMAIN" weightage="20" keywordseo="bank-of-india">Bank of India</keyword> governor <keyword id="90390" type="PERSON" weightage="20" keywordseo="Bimal-Jalan">Bimal Jalan</keyword>, who has been asked to shortlist suitable candidates.

India could soon have its first woman Chief Economic Advisor: Report

By Bijay Kumar Singh New Delhi, May 28 () Former Reserve Bank Governor Bimal Jalan on Thursday described the initiatives taken by the government to mitigate the impact of COVID-19 as "very positive" and hoped that these would help in containing the decline in growth. He further said that unlike in 1991, when the country faced a balance of payments crisis, today India has resources as well as forex reserves to deal with any eventuality. "All the measures announced by her (Finance Minister Nirmala Sitharaman) are very positive. "But as you have rightly said these are all supply side, not demand side. In terms of the economy, one does not expect higher fiscal deficit to lead to a higher economic growth in macroeconomic sense," Jalan told in an interview. Earlier this month, the government announced a Rs 20.97 lakh crore economic package, which included RBI's Rs 8.01 lakh crore worth of liquidity measures. Sitharaman had unveiled the package in five tranches, which included Rs 3.70 lakh crore support for MSMEs, Rs 75,000 crore for NBFCs and Rs 90,000 crore for power distribution companies, free foodgrains to migrant workers, increased allocation for MGNREGS, tax relief to certain sections and Rs 15,000 crore allocated to the healthcare sector. On criticism that India's economic package was too less compared to packages unveiled by countries like the US and UK, he said developed and developing nations are very different. "If you look up at developed countries, I mean their rate of growth is say 2 per cent or 3 per cent and they have a large per capita income and so on. "For developing countries' point of view, you want a high rate of growth, say at least 6 per cent or 7 per cent, and you also want inflation to be under control so that per capita income increases," Jalan noted. Asked if India's present economic crisis is as big as the 1991 balance of payment crisis, he said, "The 1991 economic crisis was very different, we had a balance of payment problem of a very deep kind. We did not have sufficient forex reserves." "Today we have resources and high forex reserves," Jalan, also a former member of Parliament, pointed out. So the current circumstances are very different from 1991, he said, adding, "Today we have the ability to do what we want to do." On whether he supports monetisation of deficit by the central bank, the former RBI governor said it is not a question of support or non-support as it depends on the situation. "In particular circumstances, you can monetise, in other circumstances, you give liquidity to the market and liquidity for the borrowers," he opined. Monetisation is loosely referred to as printing of currency by the central bank for the government to take care of any emergency spending and to bridge the fiscal deficit. On the country's macroeconomic situation, Jalan said growth rate is going to fall significantly. "Last year it was 5.2 per cent, this year estimates vary from minus 1 or minus 2 to 2 per cent at the most. "So economy is more or less static and the impact of whole coronavirus on the economy has been quite negative," he said. Rating agencies like Fitch and Crisil have drastically cut India's economic growth forecast for the current fiscal year due to the coronavirus lockdown. Fitch has estimated 5 per cent contraction in 2020-21, a sharp decline from 0.8 per cent growth projected by the global rating agency in late April. Crisil also predicted the economy will shrink by 5 per cent in the current fiscal. Earlier, it projected a growth of 1.8 per cent. India has seen four instances of contraction in GDP since 1951-52, the earliest period for which GDP data is available in the 2004-05 GDP series. These took place in the fiscals 1957-58, 1965-66, 1972-73 and 1979-80. BKS CS ABM ABM

Govt measures to deal with coronavirus impact 'very positive': Former RBI Guv Jalan

The <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword>, on Wednesday, approved the <keyword id="21763464" type="General" weightage="20" keywordseo="highest-ever-dividend" source="keywords">highest-ever dividend</keyword> payout of <keyword id="21761747" type="General" weightage="20" keywordseo="Rs-2-11-lakh-crore" source="keywords">Rs 2.11 lakh crore</keyword> to the <keyword id="19910020" type="General" weightage="20" keywordseo="Central-Government" source="keywords" meta.keywordsubtype="org" meta.entityname="Central Government" meta.hostid="261" meta.entityid="Central Government">central government</keyword> for 2023-24, a decision which will help better manage the <keyword id="6365485" type="General" weightage="20" keywordseo="fiscal-deficit" source="Orion">fiscal deficit</keyword>. The dividend or surplus transfer by the <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> to the Centre was Rs 87,416 crore for the fiscal 2022-23. The previous high was Rs 1.76 lakh crore in 2018-19. The decision on the dividend payout was taken at the 608th meeting of the Central Board of Directors of the Reserve Bank of India held under the chairmanship of Governor Shaktikanta Das. "The Board...approved the transfer of Rs 2,10,874 crore as surplus to the Central Government for the accounting year 2023-24," the RBI said in a statement. The central government aims to contain the fiscal deficit or gap between expenditure and revenue to Rs 17.34 lakh crore (5.1 per cent of the GDP) during the current financial year. In the Budget for 2024-25, the government projected a dividend income of Rs 1.02 lakh crore from the RBI and public sector financial institutions. The RBI board also reviewed the global and domestic economic scenario, including risks to the growth outlook. The Board discussed the working of the Reserve Bank during 2023-24 and approved its Annual Report and Financial Statements for the last fiscal. The RBI said that during accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the Covid-19 pandemic, the Board had decided to maintain the Contingent Risk Buffer (CRB) at 5.50 per cent of the Reserve Bank's balance sheet size to support growth and overall economic activity. "With the revival in <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword> in FY 2022-23, the CRB was increased to 6.00 per cent. As the economy remains robust and resilient, the Board has decided to increase the CRB to 6.50 per cent for FY 2023-24," the central bank added. The transferable surplus for 2023-24, the RBI said, has been arrived at on the basis of the Economic Capital Framework (ECF) adopted by it in August 2019, as per recommendations of the Bimal Jalan-headed expert committee. The committee had recommended that the risk provisioning under the CRB be maintained within a range of 6.5 to 5.5 per cent of the RBI's balance sheet.

RBI approves highest-ever dividend payout of Rs 2.11 lakh crore to central government!

Mumbai, The <keyword id="50847" type="General" weightage="20" keywordseo="reserve-bank" source="Orion">Reserve Bank</keyword> on Friday approved Rs 87,416 crore dividend payout to the central government for 2022-23, nearly triple of what it paid in the previous year. The dividend payout was Rs 30,307 crore for accounting year 2021-22. The decision was taken at the 602nd meeting of the Central Board of Directors of Reserve Bank of India held under the chairmanship of Governor <keyword id="6359111" type="General" weightage="20" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword>. "The board approved the transfer of Rs 87,416 crore as surplus to the central government for accounting year 2022-23, while deciding to keep the Contingency Risk Buffer at 6 per cent," <keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword> said in a statement. The board also reviewed the global and domestic economic situation and associated challenges, including the impact of current global geopolitical developments. The board also discussed the working of RBI during 2022-23 and approved the annual report and accounts of the central bank for the year. Madan Sabnavis, chief economist of Bank of Baroda said that this surplus transfer will come in very handy and ensure that the government managed it fiscal numbers with relative ease given that there are question marks on the divestment programme. "The Budget had looked at a number of Rs 48,000 crore as dividend from banks and RBI. RBI has overshot this number with the transfer of Rs 87,000 cr. This was enabled by higher earnings on sale of forex during the year, better returns on forex investments in US treasuries (though value of bonds would have fallen which has to be charged to the contingency reserve), revaluation of forex assets and adjustments in reserves as per the Bimal Jalan Committee recommendations. The RBI would have had higher pay-outs due to the higher SDF rates with the system being in surplus all through the year," Sabnavis said. According to him, public sector banks have also reported very good profits and announced dividend, there will be higher flows of dividends from this source too. Add to this the possible higher dividend payments by the oil marketing companies and the situation appears quite comfortable from a market perspective as this will not lead to higher market borrowings. (With inputs from PTI)

RBI approves Rs 87,416 cr dividend payout to the government for 2022-23

New Delhi, Nov 18 () Finance Minister Nirmala Sitharaman on Monday said transfer of surplus reserves from the Reserve Bank of India (RBI) to the government in future will depend on net income and other financial parameters of the central bank besides the recommendations of the expert committee on excess capital.
 The surplus distribution policy of RBI is determined in accordance with section 47 of the RBI Act, 1934, Sitharaman said in a written reply to Lok Sabha.
 "The quantum of surplus transfer to the government in the coming years would depend on RBI's net income, 'required realized equity' as a per cent of RBI's balance sheet and 'available realized equity' as a per cent of RBI's balance sheet in the coming years, and shall be governed by the legal provisions of the RBI Act, 1934 read with the recommendations of the committee as accepted by RBI," Sitharaman said.
 The central board of the RBI, in its meeting in November 2018, in consultation with the government had decided to constitute an expert committee under the chairmanship of former RBI governor Bimal Jalan to suggest an adequate level of risk provisioning that RBI needs to maintain.
 The committee, formed on December 26, 2018, was tasked to propose a suitable surplus distribution policy taking into account all the likely situations of the RBI.
 The finance minister was replying to a question asked by Gopal Chinnaya Shetty if the issue of surplus reserves of RBI was resolved as per the suggestions of the Jalan committee and whether in future the government was likely to get additional dividend from RBI as per the recommendations of the said committee.
 The Bimal Jalan expert committee had submitted its report to RBI on August 14, 2019.
 The central board of RBI, in its meeting on August 26, 2019, had accepted all the recommendations of the committee and finalised RBI's accounts for 2018-19 using the revised framework to determine risk provisioning and surplus transfer.
 "The transfer of surplus to the government for the year 2018-19, ended June 30, 2019 was made in accordance with the recommendations of the committee and accordingly a sum of Rs 1,75,987 crore was transferred by RBI to the government," the minister said in the lower house.
 The transfer of reserves comprised Rs 1,23,350 crore of surplus for 2018-19, of which Rs 28,000 crore was already paid as interim dividend on March 28, 2019, and Rs 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF), Sitharaman said. KPM RVK

Transfer of surplus money from RBI in future to depend on income, expert panel suggestions: FM

Months after he took voluntary retirement scheme (VRS) from the IAS, former Union Finance Secretary <keyword id="1984068" type="PERSON" weightage="20" keywordseo="Subhash-Chandra-Garg">Subhash Chandra Garg</keyword> who served under Modi government at the Centre has been appointed as advisor to Andhra Pradesh Chief Minister <keyword id="328022" type="PERSON" weightage="20" keywordseo="YS-Jagan-Mohan-Reddy">YS Jagan Mohan Reddy</keyword> for resource mobilisation. Garg has been assigned the rank of a Cabinet Minister, as per an order issued by Principal Secretary (Political) Praveen Prakash. He will hold the post for two years. Garg is an IAS officer of the 1983 batch of the Rajasthan cadre. Garg, who was Finance and Economic Affairs Secretary, opted for early retirement from the Indian Administrative Service (IAS) in July last year after the presentation of the Union Budget. Garg had been transferred as Power Secretary after which he demitted service. Garg maintained that the VRS application was sent before the transfer. Garg has been quite vocal in about the economic policies of the government in recent months. He had also presented a note on reforms that the government should undertake to the Centre. There were differences in the government as Garg is believed to be the architect of the budget proposal to raise $10 billion by selling sovereign bonds in external currencies, for the first time, a move that has faced severe criticism from several experts, including former Reserve Bank of India (RBI) governor Raghuram Rajan. Garg was also at loggerheads with other members of the Bimal Jalan panel, set up to decide RBI's economic capital framework, and had submitted a dissent note to the panel. "The VRS application was submitted late on Wednesday. The process requires a notice-serving time of three months. However, he (Garg) had requested to be relieved with immediate effect," a government official aware of the development said, requesting anonymity. The state government also appointed 2009-batch IAS officer <keyword id="3834955" type="PERSON" weightage="20" keywordseo="kartikeya-misra">Kartikeya Misra</keyword> as Special Secretary for resource mobilisation and institutional finance in the Finance Department. He will be in charge of new revenue-generating projects taken up by various departments, an order issued by Chief Secretary Nilam Sawhney said. Misra has also been given the full additional charge of MD, <keyword id="8853916" type="COMPANY" weightage="20" keywordseo="ap-state-financial-corporation">AP State Financial Corporation</keyword>.

A former IAS officer forced out by Modi administration joins Andhra Pradesh Chief Minister

<ul><li>RBI said it will transfer as much as ₹1.76 lakh crore of its surplus reserves to the government.</li><li>This will cut the estimated fiscal deficit by half leaving more money with the government to spend on growth measures.</li><li>Sensex gained over 150 points at Tuesday’s open as investors expect additional money supply to improve demand in the economy.</li></ul> India’s central bank has been saving for a rainy day and looks like that day has come. After much prodding by the Narendra Modi government, and based on the recommendation of a panel headed by former central bank Governor Bimal Jalan, the Reserve Bank of India (RBI) said it will transfer as much as ₹1.76 lakh crore of its surplus reserves to the government. This alone will fill up more than half of the country’s estimated fiscal deficit-- the difference between the government’s budgeted expenses and revenues-- for the current year. "This will help to some extent in bridging an estimated ₹1.5 lakh crore of shortfall in GST revenues even as the fiscal continues to be strained due to weak tax revenues," said a report by Kotak Economics Research. The Indian share market is celebrating the windfall that it expects more money slush around in the economy due to the RBI move. The Sensex kicked off to a good start and opened 164 points higher in Tuesday’s opening trade. This is in addition to the nearly 800-point <a href="https://www.businessinsider.in/markets/donald-trummp-hints-at-easing-trade-war-with-china-triggers-700-point-rally-in-sensex/articleshow/70840608.cms">Donald Trump-triggered rally</a> on Monday. Banking stocks like SBI, Axis Bank, and ICICI gained as as investors hoped that some of this additional money will go into recapitalising banks. The value of government bonds held by these banks rose in value. “As on June 30, 2019, the RBI stands as a central bank with one of the highest levels of financial resilience globally,” the central bank said in its statement. Why the market is cheering? Indian industry has long been asking for a stimulus package from the government, to overcome the deep crisis in <a href="https://www.businessinsider.in/job-cuts-at-parle-and-britannia-sales-show-indian-economy-is-in-dire-straits/articleshow/70766429.cms">the rural economy</a> as well as in sectors like <a href="https://www.businessinsider.in/hero-motocorp-tata-mahindra-and-maruti-suzuki-are-all-cutting-production-as-theres-no-demand/articleshow/70710729.cms">automobiles</a> and <a href="https://www.businessinsider.in/a-third-of-indias-textile-workers-30-million-lost-their-jobs-and-more-could-go/articleshow/70781257.cms">textiles</a>, which have cut down production and laid off millions of workers following the demand slump in recent years. Those who support the RBI move to part with its funds believe this money can come in handy for the Indian government which is facing heavy fiscal deficit, which means that it is short of funds and has limited room to spend more to stop growth from slipping down further. The Modi government has also promised to spend a whopping ₹100 trillion in building new infrastructure in the next five years. Finance Minister Nirmala Sitharaman also promised to provide as much as ₹70,000 crore in additional funds to banks in the hope to beat the current credit crunch. All of this requires money, which the government is in short supply of. The slowdown in economic activity has meant the direct tax revenue has sharply <a href="https://www.livemint.com/news/india/direct-tax-collections-fall-short-of-rs-82-000-crore-in-fy-19-1557226156318.html">slowed down</a>. The Goods and Services Tax (GST) too has fared short of expectations. along with a slowdown across the economy has cut down <a href="https://www.livemint.com/news/india/direct-tax-collections-fall-short-of-rs-82-000-crore-in-fy-19-1557226156318.html">the government's </a>direct tax revenues by ₹82,000 crore though they revised their target to ₹12 lakh crore in 2018-19. A recent move to levy extra taxes on stock investors in the latest Union Budget did not go down well with the share market, and had to be <a href="https://www.businessinsider.in/nse-and-bse-stocks-lost-over-15-lakh-crore-and-rupee-falls-against-dollar-due-to-tax-surcharge/articleshow/70837553.cms">retracted </a>by Finance Minister Nirmala Sitharaman last Friday (August 23). Those who lost their jobs opposing the move The government’s push to get RBI to transfer excess money has faced severe opposition. The dissent by former Secretary of the Department of Economic Affairs, Subhash Chandra Garg, was <a href="https://www.ndtv.com/business/subhash-chandra-garg-exit-linked-to-sovereign-bond-plan-prime-ministers-office-unhappy-says-report-2075600">one of the main reasons</a> for which he was forced out the Finance Ministry prematurely. Even the former RBI Governor Urjit Patel and former Deputy Governor Viral Acharya left the central bank unceremoniously after contentious standoffs with the government over many issues including the proposal to transfer RBI surplus to the government. Economists in India have been largely divided on the issue because many fear this impedes the RBI’s autonomy. The <a href="https://www.businessinsider.in/nirmala-sitharaman-finance-minister-bimal-jalan-committee-report-on-rbi-surplus-reserves-next-meeting/articleshow/69587872.cms">key questions</a> were who should decide the use of RBI surplus and how should it be spent. The recommendation of an independent panel may partly answer the first question and as for the second question, all eyes are now on the government. SEE ALSO: <a href="https://www.businessinsider.in/nirmala-sitharaman-finance-minister-bimal-jalan-committee-report-on-rbi-surplus-reserves-next-meeting/articleshow/69587872.cms">A bitter debate may hound Finance Minister Nirmala Sitharaman in the first fortnight-- what to do with RBI's surplus reserves</a>

RBI offers Narendra Modi government money to boost growth-- share markets cheer

Mumbai, Dec 31 () When the Narendra Modi government, stumped by the sudden resignation of Urjit Patel, parachuted retired bureaucrat Shaktikanta Das to RBI in December 2018, many expected a great lull in the public acrimony that marred the days of his academically more illustrious predecessors Patel and Raghuram Rajan.
 And 'the history graduate', as Das was parodied in his initial days, did not disappoint as the 25th governor of the central bank. He completed one year at the helm on December 12.
 But challenges are galore for the nation's chief money man as Das' record-setting rate cuts did not alleviate credit crisis, especially in the shadow banking space, and now turmoil in the cooperative banks sector due to the PMC scam.
 Also, falling growth and spiralling inflation are the other critical challenges facing the Reserve Bank of India (RBI) in the New Year.
 So far this fiscal, bank credit has grown just 7.8 per cent, against 13.6 per cent a year ago and might plunge to a 58-year low of 6.5-7 per cent by March, if the latest projections are anything to go by.
 It was in fiscal 1962 when credit demand was lower than this on record. At that time, it stood at 5.4 per cent.
 Ironically, the more the Reserve Bank of India (RBI) slashed rates, the faster the economy turtled, hitting a 25-quarter low of 4.5 per cent in the September quarter.
 Even as it eased the rates, the RBI slashed growth estimates by an unprecedented 240 basis points since the rate cutting cycle began in February to a low of 5 per cent.
 Similar has been its loss of face on the inflation front, which, after hovering under the glide path for a few years, has suddenly screeched up and is now pegged sharply higher at 5.1-4.7 per cent for 2020.
 Das, who as the economic affairs secretary managed the note ban mayhem with elan both for the government and the RBI, could temper the raising tempers between the central bank and the government, was primarily because he gave in a lot of space to North Block.
 Be it the historic cash transfers by setting up the Bimal Jalan panel in December 2018 itself or taking some of the crippled state-run banks out of the RBI radar or in getting a new NPA framework in place by June 2019 or in opening a special financing window for MSMEs.
 Under his governorship, Das silenced the ever-hungry market and North Block mandarins with 135 basis points reduction in interest rates through five successive rate cuts.
 However, the central bank's youngest Deputy Governor ever -- Viral Acharya -- quit six months before his three-year term was to end in June 2019.
 But those who know Das, including the RBI staff, fully back his working style and glasnost.
 RBI Central Board member Sachin Chaturvedi described Das as a person who brings in pragmatism, commitment, transparency and sincerity to the table.
 "Das has succeeded in getting government and other functionaries together and has made the board a cohesive platform," he told .
 Das also settled the autonomy issue -- most contentious of all -- and had said that so far as decision-making is concerned or taking a final call on any issue, they are taken by the RBI and is more than 100 per cent autonomous in decision-making.
 "Nobody interferes in my decision-making," Das said in September.
 The RBI, under Das, has been instrumental in diversifying liquidity management toolkit by launching the dollar-rupee swap auctions -- buying dollars and releasing equivalent amount of rupees into the system to ease liquidity.
 And the latest in containing rupee volatility and bond spikes are the open market operations twist under which RBI buys and sells equal quantum of gilts.
 Allowing non-residents to participate in rupee interest rate derivatives markets and making NEFT 24x7 and free are among the other decisions this year.
 RBI also put its foot down when it declined to raise the retirement age of private sector bank CEOs from 75 years, refused green-signal to Indiabulls' takeover bid for the crippled Lakshmi Vilas Bank and said no to Uday Kotak's convoluted stake dilution move at Kotak Mahindra Bank. The last matter is now before the Bombay High Court.
 The apex bank also got regulatory powers of the NHB following the crisis at DHFL, also the first non-banking finance company to be referred for insolvency proceedings.
 It also forced banks to link all fresh retail loans to an external benchmark, following which repo rate was made as their benchmark for loan pricing.
 While the RBI should be credited for seeing the slowdown coming and cutting rates, the apparent fault was in not anticipating severity of the economic slump.
 However, the central bank unexpectedly paused rate cuts in December. It indicates the RBI is waiting for the budget on quality of fiscal deficit and quantum of off-balance-sheet borrowings, among others.
 Having worked with three finance ministers, Das also made the long and stormy RBI board meetings into non-events in no time with his consultative process even as he made it clear that the central bank is not a "cheer leader" for anyone.
 All said, it is difficult to say now whether it has been a year of floccinaucinihilipilification or that Das maintained a Panglossian countenance, smiling away at every difficulty.
 Monetary Policy Committee's Chetan Ghate had used the 29-letter word --floccinaucinihilipilification -- which refers to an action of estimating something as worthless.
 The New Year might have a clear if not direct answer to Panglossian ways. BEN HV RAM BAL ANS
ANS

History behind, Das-led RBI charts new trails sans acrimony

<a href="http://www.businessinsider.in/searchresult.cms?query=urjit+patel&amp;sortorder=effectivedate">Urjit Patel</a>, the <a href="http://www.businessinsider.in/searchresult.cms?query=rbi&amp;sortorder=effectivedate">RBI</a> Governor, while asking his colleagues to guard the integrity of central bank, said that any effort to belittle the reputation of the central bank deserves "zero tolerance". He was addressing the staff for the first time when he wrote this in an email. 
 He also said that the <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword> has achieved the excellence only because of the collective efforts of its employees. 
 
While specifically talking over <a href="http://www.businessinsider.in/searchresult.cms?query=demonetisation&amp;sortorder=effectivedate">demonetisation</a>, he said, "Let me emphasise that one thing we should all zealously guard is the integrity and reputation of our organisation and any act belittling the same should deserve zero tolerance from all of us." 
 It may be noted that during the <keyword id="3315394" type="UNKNOWN" weightage="20" keywordseo="demonetisation">demonetisation</keyword> drive, a few senior RBI employees were held for alleged money laundering and illegal exchange of banned notes. Following this, the CBI had in December arrested a few RBI officials. 
 
Post-note ban announcement, the RBI in general and Patel in particular, were also criticised by Opposition politicians as well as analysts over "abdication" of responsibility by the monetary authority. 
 
Some of Patel's predecessors including D Subbarao, Y V Reddy, Bimal Jalan, and Manmohan Singh, criticised the apex bank for not doing enough to reassure the public in the wake of currency invalidation exercise. 
 
During the 50-day demonetisation period, the RBI faced flak for numerous flip-flops over currency exchange norms. 
 
"I am confident that all of us working together will rise to the occasion and face these challenges in a manner befitting the reputation of this esteemed organisation," Patel said in his email to the employees on the eve of the New Year. 
 
Patel said that during the year gone-by, RBI continued its efforts at restoring macroeconomic stability to the economy. 
"While the policy actions have already shown positive effects, nevertheless they are work in progress and need to be fine-tuned constantly to keep pace with the changing environment," he said. 
 
RBI employees union, feeling "deeply humiliated" by the events since demonetisation, on January 13 wrote a letter to Patel protesting against operational mismanagement in the exercise and the government bid to impinge on its autonomy by appointing an official for currency coordination. 
 
In the letter, they claimed this has "dented beyond repair" RBI's autonomy. They said appointment of a senior Finance Ministry official for currency coordination was a "blatant encroachment" on RBI's exclusive turf of currency management.

Urjit Patel writes to employees, asks them to protect RBI’s reputation

With indications that NDA may come to power, there is speculation over conflict between the central bank governor and the new govt. But much will depend on the equation Rajan can build with the new FM, the way some of his predecessors did. 
 The <keyword id="6354335" type="CITY" weightage="40" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> Governor, <keyword id="6358908" type="PERSON" weightage="80" keywordseo="Raghuram-Rajan">Raghuram Rajan</keyword>, passed the banking licence litmus test by leaning on Bimal Jalan. The former Chicago University Professor can take a leaf out of the same elder statesman of Indian bureaucracy on how to navigate the rough seas after May. 
 Soon after the Atal Bihari Vajpayee-led National Democratic Alliance, or NDA, Government came to power in May 1998, Jalan, the then <keyword id="64190" type="POSITION" weightage="80" keywordseo="RBI-Governor">RBI governor</keyword>, reached out first to finance minister Yashwant Sinha and principal secretary to the prime minister, Brajesh Mishra. 
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	That was not to save his job, but to save the economy. So convincing was Jalan that not only did he manage to end the cacophony of voices from the party that called for a stronger rupee, he also got rewarded with another term at the RBI, and a nomination to the Rajya Sabha.
 
 Sorting out such politically tricky issues is inevitable for any central bank governor globally. At that time, it didn’t matter to the alliance that Jalan had been appointed by the previous United Front Government led by IK Gujral with <keyword id="43940" type="PERSON" weightage="40" keywordseo="P-Chidambaram">P Chidambaram</keyword> as Finance Minister. 
 
Similar challenges await Raghuram Rajan, with a new government set to assume office — one which is widely perceived to be a non-Congress political formation. Doom sayers, among them, shockingly, government officials, are already at work claiming how his approach may not be in consonance with a Modi-led sarkar. In other words, count on a confrontation soon, is what they appear to be implying. 
 
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They may well be wrong. In the last 25 years, the working relationship between the government represented by the finance minister and RBI governors may not have always been smooth. Yet, despite frosty ties, especially towards the fag end of the tenures of at least more than one governor, the political establishment has held back perhaps mindful of the downside to cutting the institution and its head to size.
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	Former finance minister, Yashwant Sinha is one of those who is quick to dismiss such speculation. A new government should not rock the boat and change the head of the central bank, he says, making it clear that he reckons Rajan is doing well and would distinguish himself further.
Sinha should know. For back in 1990, as the finance minister of the short -lived Chandrasekhar Government, which survived on a “daily wage basis” as ministers themselves dubbed it, he had the unpleasant task of telling the then governor of RBI, RN Malhotra to step down and pave way for S Venkitaramanan, a civil service colleague and a former finance secretary. This was after Malhotra had been given a fresh term by the previous VP Singh-led National Front Government after he completed five years. 
 Yashwant Sinha says that was a political decision, taken under pressure from the <keyword id="1575" type="ORGANIZATION" weightage="60" keywordseo="Congress">Congress</keyword> led by Rajiv Gandhi, which provided support to the Chandrasekhar Government only to pull the plug after barely four months. The only other case of a change in guard following a new government coming to power was when KR Puri, who was appointed as RBI governor during the emergency, was moved out days after the Janata Party came to power. <table align="center" border="1" cellpadding="1" cellspacing="1">
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In RBI’s long history, there have been enough instances of governors quitting — the first being as early as 1936 when Sir Osborne Smith quit after differences with the head of the treasury and one of his deputy governors; later Sir Benegal Rama Rau quit over differences with finance minister TT Krishnamachari. Not that all this is unique to India. Such instances abound in Thailand, Argentina and a few other countries. 
 
According to Sinha, what makes the difference is the personal equation between the two —the finance minister and the governor. It all boils down to the kind of rapport the two develop and their personalities, he says, citing his experience with Jalan when their engagement went beyond the realm of just monetary policy. 
 
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Between 1998 and 2002, during budget making, Sinha used to lean on Governor Jalan, a former chief economic advisor, banking secretary and finance secretary, for advice on budgetary issues. That was way beyond the central bank chief ’s remit, Sinha says making the point such institutional arrangements cannot be formalised as part of statutes. What could also have helped boost such ties is the long stint in government and experience of policy making for both Jalan and his successor Reddy. 
 
That will be a test for Rajan who soon after his appointment as governor worked out a unique, but a non-formal, agreement with finance minister P Chidambaram under which the turf was clearly marked out for both the finance ministry and the RBI. The minister who often advocated lowering rates ahead of a monetary policy review, attracting criticism for putting pressure on the central bank, worked out the arrangement with Rajan after ties between North Block and the RBI soured towards the end of Subbarao’s tenure in 2013. 
 That may have worked well especially with the <keyword id="26374" type="ORGANIZATION" weightage="40" keywordseo="UPA-government">UPA government</keyword> on its last leg. But unlike some of his predecessors who had the advantage of having worked in the government for long and engaging with politicians of all hues, Rajan may have to build such ties from scratch. 
 That is because he has been away for long with his formal association with the government having started as late as 2008 as an advisor to the prime minister. In the second half of 2012, the former <keyword id="69755" type="POSITION" weightage="40" keywordseo="Chief-Economist">chief economist</keyword> of IMF finally came on board as chief economic advisor before being appointed as RBI governor last September. 
 
Any perceived discomfort at what lies ahead could also be because of lingering statements such as the one by BJP’s treasurer Piyush Goyal, who had indicated that the governor’s approach to inflation management was faulty. 
 
The BJP is also uncomfortable with the idea of granting banking licences to business houses. All these come at a time when the RBI led by Rajan has pitched for inflation targeting, an approach, which a new political formation has to buy into. And which would call for an explicit agreement with the government that may be wary given the political risks in the event of any failure to cool prices. There are other major challenges, too, such as the potential re-shaping of the role of the RBI, as outlined by the Financial Sector Legislative Reforms Commission, if at all the new government chooses to pursue the recommendations, besides the future of state-owned banks. 
 
But he cannot baulk. Rather, he will have to continue like his predecessors and lay bare unpleasant facts to the government. Manmohan Singh, who was governor between 1982 and early 1985, had to write to the finance minister in the context of high inflation that the monetary implications of a vast fiscal imbalance were truly disturbing. Similarily, RN Malhotra wrote a series of letters towards the fag end of the Congress-led government in 1988-89 and to the VP Singh government on the dangers of a severe balance of payment crisis in the offing, well before it unfolded in 1990-91. 
 
So did Subbarao on fiscal excesses and the need for a credible fiscal consolidation. And such professional conflicts, which sometimes spill over into ego issues, are part of the job. YV Reddy, too, had run-ins with the government, including on the use of foreign exchange reserves, participatory notes or the product used by foreign portfolio investors to invest in Indian stocks and on consolidation of Indian banks. 
 
Some in the financial markets may be busy speculating on his future. But politicians and policy makers are aware that though the current incumbent may not have dirtied his hands in the Indian establishment, he is no pushover. 
 
Having impressed by stabilising a wobbly currency and setting the agenda in international forums, there is nothing to lose for Rajan, but there’s quite a bit for the government.

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