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<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

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

<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>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, 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

<ul><li>In a bid to meet its <keyword id="6365485" type="DEFINITION" weightage="20" keywordseo="Fiscal-Deficit">fiscal deficit</keyword> target, the government has secured a much-needed lifeline from the RBI. </li><li>The RBI will transfer ₹280 billion worth of its <keyword id="6698811" type="UNKNOWN" weightage="20" keywordseo="Surplus">surplus</keyword> reserves in the form of an <keyword id="7341827" type="UNKNOWN" weightage="20" keywordseo="Advanced-dividend">advanced dividend</keyword> to the government. </li><li>This is in addition to the ₹400 billion it has already transferred this fiscal year so far. </li></ul>In a desperate attempt to meet its fiscal deficit target, which has been raised slightly from 3.3% to 3.4% of GDP, the Modi administration has secured a much-needed lifeline from the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI). The RBI will transfer ₹280 billion worth of its surplus reserves in the form of an advanced dividend to the government for the half year ended December 2018, in addition to the ₹400 billion it has already transferred this fiscal year so far. Speaking to <a href="https://twitter.com/ETNOWlive/status/1097496331684200448">ET Now</a>, Ananth Narayan, a professor of SPJIMR, said that the government’s practice of taking an advanced dividend from the RBI was akin to a company taking money from a subsidiary in advance of the subsidiary having earned that amount. He also said that the government’s projections of RBI revenues for the year were highly optimistic. The RBI’s financial year runs from July to June while the government follows a April to March system, making an advanced dividend payout a particular burden on the central bank, which has three more months before the year ends. Of course, this was expected, especially in the wake of a extremely <a href="https://www.businessinsider.in/rbi-may-bump-up-dividend-to-help-modi-fund-the-generous-budget-sops/articleshow/67862426.cms">populist interim budget</a> and a shortfall in tax revenues. One of the budget’s major initiatives, a cash handout to farmers, <a href="https://economictimes.indiatimes.com/news/politics-and-nation/pm-narendra-modi-to-launch-scheme-to-give-rs-6000-to-farmers-on-feb-24/articleshow/67979715.cms">will commence on February 24th</a>, and is expected to comprise an outlay of around ₹200 billion by March 31st. A clash between the central government and the RBI over the size of such a transfer, among other issues, culminated in the resignation of former governor <keyword id="6375119" type="PERSON" weightage="20" keywordseo="urjit-patel">Urjit Patel</keyword> in December last year. When <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword>, a government insider, was installed in Patel’s place, his motivations were clear: to play ball with the Modi administration. Earlier this month, he went on record to say that since the RBI was a government institution, the central government <a href="https://www.news18.com/news/business/its-govt-right-to-demand-interim-dividend-and-use-it-the-way-it-wants-says-rbi-governor-2028619.html">had the right</a> to decide how much of its reserves it required. The dividend transfer will help the Modi government try and deliver on its budget promises, which will boost its prospects for re-election in May. However, this might come at the cost of the central bank’s financial health. ‘The RBI has <a href="https://www.business-standard.com/article/finance/rbi-has-insufficient-capital-much-less-surplus-to-hand-over-to-government-119012400500_1.html">inadequate capital reserves</a> to service such a transfer, according to the Centre for Advanced Financial Research and Learning, a Mumbai-based think tank. A study by the think tank showed that at 6.6%, the RBI’s capital-to-assets ratio, was more than 30 basis points lower than the average level seen in emerging markets, indicating under-capitalisation. Besides, the RBI needs its surplus capital to shore up the rupee, lend to banks and provide adequate liquidity support to the economy, which is reeling from a slowdown in credit growth and aggregate demand following <a href="https://www.financialexpress.com/industry/banking-finance/all-you-need-to-know-about-current-liquidity-crisis-at-indias-nbfc/1370224/">the crisis in the NBFC sector</a>. SEE ALSO: <a href="https://www.businessinsider.in/what-if-interim-budget-2019-replaces-subsidy-with-cash-transfer/articleshow/67658379.cms">Explained: The cost of giving India's farmers cash instead of subsidies</a> <a href="https://www.businessinsider.in/rbi-may-bump-up-dividend-to-help-modi-fund-the-generous-budget-sops/articleshow/67862426.cms">RBI may bump up dividend to help Modi fund the generous budget sops</a> <a href="https://www.businessinsider.in/the-resignation-of-the-governor-of-indias-central-bank-sends-a-clear-indication-about-the-erosion-of-institutional-autonomy-under-the-modi-administration/articleshow/67040287.cms">The resignation of the governor of India’s central bank sends a clear indication about the erosion of institutional autonomy under the Modi administration</a>

The Modi administration’s overspending gets rewarded with an interim dividend from the central bank

<ul><li><keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword> has said that 25% of the amount of I-CRR maintained by banks will be released on Saturday and another 25% on September 23. </li><li>Releasing money in tranches helps to smoothen out liquidity and avoid sudden gush of funds, says Madan Fadnavis of Bank of Baroda.</li><li></li></ul> The Reserve Bank on Friday decided to discontinue the <keyword id="18349664" type="General" weightage="50" keywordseo="incremental-cash-reserve-ratio" source="Orion">Incremental Cash Reserve Ratio</keyword> (I-CRR), which was put in place to absorb surplus liquidity following the withdrawal of Rs 2,000 currency notes, in a phased manner beginning Saturday. On August 10, the RBI mandated banks to maintain an incremental cash reserve ratio (I-CRR) of 10% on the increase in their net demand and time liabilities (<keyword id="312584" type="General" weightage="20" keywordseo="NDTL" source="Orion">NDTL</keyword>) between May 19, 2023 and July 28, 2023. The measure was intended to absorb the surplus liquidity generated by various factors, including the return of Rs 2,000 notes to the banking system. "On a review, it has been decided to discontinue the I-CRR in a phased manner," the central bank said in a statement. There is surplus liquidity in system of around Rs 75,000 cr of late, according to Madan Sabnavis, chief economist at Bank of Baroda. He adds, "Releasing money in tranches helps to smoothen out liquidity and avoid sudden gush of funds." Based on an assessment of current and evolving liquidity conditions, it has been decided that the amounts impounded under the I-CRR would be released in stages so that system liquidity is not subjected to sudden shocks and money markets function in an orderly manner, it added. The RBI said 25% of the amount of I-CRR maintained by banks will be released on Saturday and another 25% on September 23. The rest will be released on October 7. While announcing the I-CRR, RBI Governor <keyword id="6359111" type="General" weightage="50" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> had indicated that the provision was a temporary measure for managing the liquidity overhang. The RBI had announced that the I-CRR would be reviewed on September 8, 2023, or earlier with a view to returning the impounded funds to the banking system ahead of the festival season. Following the withdrawal of the Rs 2,000 notes, the liquidity with the banks had surged significantly, the I-CRR was aimed to absorb the excess cash. As much as 93% of Rs 2000 currency notes that were in circulation on May 19 -- the day when the currency was withdrawn from circulation -- have been returned to banks. The advance tax payments are due next week which will put pressure on liquidity further. The total value of Rs 2000 banknotes received back from circulation is Rs 3.32 lakh crore up to August 31, 2023. Fadnavis adds, "The question is whether this will be adequate next week when there are tax outflow. This is because the amount coming in of around Rs 25-27,000 cr will cover the outflow through the V3R today and will not leave much surplus." (With text inputs from PTI)

RBI decides to withdraw incremental CRR in phased manner and release it by Oct 7

<ul><li>The government is reportedly planning to secure a ₹690 billion <keyword id="56600" type="PERSON" weightage="20" keywordseo="Dividend">dividend</keyword> from the <keyword id="6358156" type="ORGANIZATION" weightage="20" keywordseo="central-bank">central bank</keyword> for the coming fiscal year. </li><li>This is well over twice the dividend of ₹280 billion it expects from the <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword> in the current fiscal year, in addition to a ₹400 billion surplus transfer. </li><li>The issue of the transfer of dividends has been a particularly contentious one, leading to a very public spat between the central government and the RBI last year. </li></ul>Acting Finance Minister Piyush Goyal presented a pretty generous <keyword id="547606" type="ORGANIZATION" weightage="20" keywordseo="interim-budget">interim budget</keyword> last week featuring a cash handout to farmers, a pension scheme for informal workers and tax breaks for the middle class. It also promised not to overshoot its <keyword id="6365485" type="DEFINITION" weightage="20" keywordseo="Fiscal-Deficit">fiscal deficit</keyword> target for this year by more than 0.1% of GDP. While Most critics <a href="https://www.businessinsider.in/india-markets-update-sensex-nifty-recover-late-and-moodys-on-budget-fiscal-deficit-target/articleshow/67831968.cms">were confused </a>as to how the government would finance these spending obligations, especially in the wake of a shortfall in tax revenues. The answer may lie with the country’s central bank. The government is planning to secure a ₹690 billion dividend from the Reserve Bank of India (RBI) for the coming fiscal year, according <a href="https://indianexpress.com/article/business/finmin-expects-rs-69k-crore-dividend-from-rbi-in-fy20-5571036/">to media reports</a> citing an official from the finance ministry. This is well over twice the dividend of ₹280 billion it expects from the RBI in the current fiscal year, in addition to a ₹400 billion surplus transfer. This figure reportedly includes allocations from the previous fiscal years that the government didn’t take because it’s finances were in a better condition. In its overall Budget for 2019-2020, the government has earmarked a total contribution of ₹830 billion in the form of surpluses from the central bank, public-sector banks and other financial institutions. The issue of the transfer of dividends has been a particularly contentious one, leading to a very <a href="https://www.businessinsider.in/the-spat-between-indias-central-bank-and-the-government-gets-more-heated-as-the-finance-minister-blames-it-for-not-doing-enough-to-prevent-the-countrys-bad-loan-problem/articleshow/66442846.cms">public spat</a> between the central government and the RBI and questions regarding the institutional autonomy of the central bank and the government’s attempts to contain its fiscal deficit. However, with a former government insider, <a href="https://www.businessinsider.in/indian-government-appoints-former-economic-affairs-secretary-shaktikanta-das-as-reserve-bank-of-india-governor/articleshow/67046441.cms">Shaktikanta Das</a>, in place at the helm of the central bank, consensus may be easier to achieve. The RBI has cash reserves of just under ₹10 trillion, but this mainly for lending to domestic banks and sustaining liquidity and by effect, aggregate demand in the economy. SEE ALSO: <a href="https://www.businessinsider.in/the-spat-between-indias-central-bank-and-the-government-gets-more-heated-as-the-finance-minister-blames-it-for-not-doing-enough-to-prevent-the-countrys-bad-loan-problem/articleshow/66442846.cms">The spat between India’s central bank and the government gets more heated as the finance minister blames it for not doing enough to prevent the country’s bad loan problem</a> <a href="https://www.businessinsider.in/after-weeks-of-tension-the-reserve-bank-of-india-gives-in-to-some-of-the-central-governments-demands-while-retaining-its-independence/articleshow/66705908.cms">After weeks of tension, the Reserve Bank of India gives in to some of the central government's demands while retaining its independence</a>

RBI may bump up dividend to help Modi fund the generous budget sops

Mumbai, Governor <keyword id="6359111" type="General" weightage="50" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> on Thursday said the <keyword id="50847" type="General" weightage="50" keywordseo="reserve-bank" source="Orion">Reserve Bank</keyword> is not "unduly concerned" about the Russian investments in Indian government bonds. Without sharing the details of the trade surplus invested by Russian entities in government securities (G-secs), Das underlined that trade relations between the two countries are for the long term and there is no reason to fear a pullout of the money. In May this year, the Indian Banks Association had said that <keyword id="6358826" type="General" weightage="20" keywordseo="russia" source="Orion">Russia</keyword> is investing the surplus it earns out of oil sales to India in G-secs, but the market's estimates on the quantum vary from USD 10-22 billion. "Its not something about which we are really unduly concerned. We are not concerned unduly because market has its estimates. So far as we are concerned, it is not going to cause any (impact)," Das told reporters at the post-policy press meet here. He added that India is "far better placed" with forex reserves of over USD 600 billion to deal with any situation. Deputy Governor T Rabi Sankar said it will not be proper for the <keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword> to speak specifically about the amounts invested by a country or a particular entity, but added that such investments are allowed through the foreign portfolio investor or vostro account route. "It may not be accurate to think that the trade surplus is staying in the country. Because a large part of that is oil. Oil, up to the global cap can be paid through the normal channels. It is getting paid, most of it is getting paid, some of it could be remaining as rupee balances in SRVA accounts. Don't include the trade balance of USD 40 billion or something to the amount that must remain within the country," Sankar added. Das also said that after the war between Russia and Ukraine broke out last year, there were fears of a depreciation in the rupee but the same did not turn out to be true because of RBI's market interventions. "...none of that happened because the RBI was there in the market. And RBI is always there in the market," Das said, adding that the RBI is confident of dealing with any situation if at all it arises.

RBI not 'unduly concerned' about Russian investments in G-secs, says Das

<ul><li>Following a nine-hour meeting, the board of the RBI and officials from the central <keyword id="26362" type="ORGANIZATION" weightage="20" keywordseo="Government">government</keyword> were able to reach a compromise on a number of issues. </li><li>The central bank agreed to implement measures to improve the flow of credit to the micro-small-and-medium enterprise (MSME) sector and to work towards easing restrictions on state-owned banks. </li><li>The RBI also decided to institute a panel that will decide upon the transfer of its surplus funds to government coffers and review the reserve <keyword id="36749" type="ORGANIZATION" weightage="20" keywordseo="capital">capital</keyword> requirements imposed on Indian banks. </li></ul>As <a href="https://www.businessinsider.in/a-compromise-between-the-rbi-and-the-central-government-could-be-in-the-offing-as-the-board-to-central-bank-prepares-to-meet-next-week/articleshow/66619722.cms">predicted</a>, the <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI) and the central government were finally able to reach a truce following <a href="https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=45523">a marathon meeting</a> of the 18-member board of the central bank on Tuesday. Among the many concessions the RBI agreed upon, the main ones were to implement measures to improve the flow of credit to the micro-small-and-medium enterprise (MSME) sector and to work towards easing restrictions on state-owned banks. While the two parties will continue to differ over a number of issues, the central bank is expected to retain its autonomy when it comes to decision-making. Terms of the truce Given the ongoing liquidity crisis in the non-banking financial sector, the central government had been vocal about the slowdown in credit to small businesses around the country. The RBI had opposed the ask saying that easing credit could result in a further pile-up of bad loans. Over the course of the November 19 meeting, the board of the RBI decided to formulate a scheme to restructure the bad loans of SMEs to the tune of ₹250 million or less in lieu of access to additional financing. Secondly, the RBI agreed to review the restrictions imposed on banks under its Prompt Corrective Action (PCA) framework. Most of the banks on the PCA watchlist are state-run banks given their disproportionately large share of non-performing loans in the Indian banking sector and recent history of losses. Following the review, the RBI’s Board of Financial Supervision is expected to release some banks from the programme - something that the government has insisted upon. Speaking to media outlets on Monday, the principal economic advisor to the government, Sanjeev Sanyal, said that it was imperative for there to be <a href="https://www.livemint.com/Companies/Lv7U81nwl85rgaz1HjZiEL/Cant-have-Hotel-California-approach-towards-RBI-PCA-banks.html">an exit plan </a>in place for banks under the PCA framework. Thirdly, the board of the central bank decided to institute a panel primarily tasked with deciding upon the transfer of surplus funds to government coffers and review the reserve capital requirements imposed on Indian banks. The Indian government has recently raised demands that it should receive a larger share of RBI’s surplus funds as it struggles to meet its fiscal deficit target. The ask was strongly opposed by RBI, which said it needed stronger cash reserves in the event of a financial downturn. While the RBI decided to retain the capital adequacy ratio for banks at 9% of risk-weighted assets, which is one percentage point more than what is prescribed under <keyword id="142572" type="PERSON" weightage="20" keywordseo="Basel-III">Basel III</keyword> norms, it has given them an additional year to implement Basel III requirements by March 2020. The compromise came as a relief to market speculators as fears about the resignation of RBI governor <keyword id="6375119" type="PERSON" weightage="20" keywordseo="urjit-patel">Urjit Patel</keyword> were put to rest. Both the R<a href="https://www.livemint.com/Money/tKGf3TKkN0XeExXVhNO1TL/Rupee-bond-prices-gain-as-RBI-government-hint-truce.html">upee</a> and <a href="https://www.google.co.in/search?q=sensex&amp;rlz=1C1GCEU_enIN820IN820&amp;oq=sensex&amp;aqs=chrome..69i57j69i60j69i57j69i59j69i60j69i61.881j0j7&amp;sourceid=chrome&amp;ie=UTF-8">Sensex</a> index were up Monday, while prices on 10-year government bonds also increased. The truce, by no means, indicates an end to disagreements between the government and the central bank, which isn’t a bad thing. Given the difference in their goals and the timeline of their mandates, the two parties may butt heads again over a number of issues. However, the outcome of the board meeting of the RBI shows that when needed, a compromise can be reached and long-term stability can be reconciled with short-term boosts to the economy. SEE ALSO: <a href="https://www.businessinsider.in/a-compromise-between-the-rbi-and-the-central-government-could-be-in-the-offing-as-the-board-to-central-bank-prepares-to-meet-next-week/articleshow/66619722.cms">An end to the spat between the RBI and the government could be in sight as the board of the central bank prepares to meet next week</a> <a href="https://www.businessinsider.in/the-spat-between-indias-central-bank-and-the-government-gets-more-heated-as-the-finance-minister-blames-it-for-not-doing-enough-to-prevent-the-countrys-bad-loan-problem/articleshow/66442846.cms">The spat between India’s central bank and the government gets more heated as the finance minister blames the RBI for not doing enough to prevent the country’s bad loan problem</a> <a href="https://www.businessinsider.in/indias-government-wants-to-dilute-an-important-corrective-programme-for-the-nations-struggling-lenders-and-the-central-bank-is-having-none-of-it/articleshow/66411552.cms">India’s government wants to dilute an important corrective programme for the nation’s struggling lenders — and the central bank is having none of it</a>

After weeks of tension, the Reserve Bank of India gives in to some of the central government's demands while retaining its independence

Mumbai, May 8 () With government borrowings likely to increase in the current fiscal, there is a need to increase the demand for bonds and conduct reverse repo as well as term reverse repo operations without placing any collateral with the Reserve Bank of India, says a report. For conducting such reverse repo operations, the Reserve Bank of India Act needs to be amended, the research report by State Bank of India (SBI) - Ecowrap noted. "Given that 2020 is going to be an exceptional year with government borrowings set to jump, we believe the time has now come for increasing the demand for bonds by having the necessary amendment in the RBI Act used effectively so that conduct of reverse repo and term reverse repo operations are completely non-collateralized," it said. Reverse repo is lending of funds against buying of securities with an agreement to resell the said securities on a mutually agreed future date at an agreed price which includes interest for the funds lent. Under reverse repo operations, banks deposit excess funds with the Reserve Bank of India (RBI) and earn interest on it. As lending to the central bank has no credit risk, there is no need to provide government securities as collateral when a market participant places its funds with the RBI, the report said. "Additionally, since securities obtained under reverse repo are eligible for statutory liquidity ratio (SLR), it will thus ensure an overall increase in the demand for bonds," the report said. With the continuous liquidity support by RBI, the system surplus liquidity position has increased significantly and banks have parked an average of Rs 6 lakh crore in May, compared to Rs 4.8 lakh crore in April and Rs 2.9 lakh crore in March under the reverse repo window of RBI. The report said in order to absorb surplus liquidity from the system without the need for providing collateral in exchange, RBI has been planning to introduce a (low) remunerated standing deposit facility (SDF). The Urjit Patel Monetary Policy Committee had recommended this instrument and indicated that this would be done with the discretion to set the interest rate without reference to the policy target rate. The committee recommended that the introduction of the standing deposit facility will require amendment to the RBI Act and may replace reverse repo in the long-run. "We believe that such uncollateralised absorption of liquidity by the central bank will pave the way for the government to suck out additional liquidity at lower cost through SDF," the report said. The report also recommended that there should not be any cap on the amount of funds placed at the RBI window for reverse repo, rather it should be abandoned and SDF should be introduced. "Capping the quantum of funds in reverse repo as was done in 2007 creates significant market distortions in the onshore rate pricing metric as well as the knock on impact on the FX pricing metric," it said. HV DRRDRR

Need for non-collateralized reverse repo operations: SBI Report

<ul><li>India’s largest private sector bank <keyword id="6354731" type="UNKNOWN" weightage="20" keywordseo="state-bank-of-india">State Bank of India</keyword> (SBI) is yet again reducing the interest rates on term deposits across all maturities. </li><li>From now on, the <keyword id="3159390" type="PERSON" weightage="20" keywordseo="marginal-cost">marginal cost</keyword> of funds based lending rate (MCLR) for a year will be 8.15% per annum. </li><li>In view of the falling interest rate scenario and surplus liquidity, SBI also realigns its interest rate on term deposits (TD) w.e.f. September 10. </li><li> Recently, the Reserve Bank of India reduced the repo rates by 110 bps.</li></ul>India’s largest private sector bank State Bank of India (SBI) will reduce the interest rates on term deposits across all maturities, starting tomorrow i.e. 10 September 2019. The bank slashed the retail term deposit rates by 25 bps or 0.25%. The bulk term deposit rates have slipped by 10-20 bps. "In view of the falling interest rate scenario and surplus liquidity, SBI also realigns its interest rate on term deposits (TD) w.e.f. September 10,” the bank said. However, while this might come as bad news for those who want to store their money in FDs, those keen on taking loans have some good news in store. The bank also announced a reduction in marginal cost of funds based lending rate (MCLR) by 10 bps. Given that, the MCLR for a year will be 8.15% per annum — which is currently at 8.25%. This is the fifth year that the bank has cut MCLR. Recently, the Reserve Bank of India (RBi) reduced the repo rates by 110 bps, and asked the banks to trim the interest rates in favour of the customers. Under this, the borrowers will directly benefit from the RBI rate cuts.

You Searched For "rbi surplus reserves" and got 12 results

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

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

PTI

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

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

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

Agencies

The Modi administration’s overspending gets rewarded with an interim dividend from the central bank

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RBI decides to withdraw incremental CRR in phased manner and release it by Oct 7

BI India Bureau

RBI may bump up dividend to help Modi fund the generous budget sops

Dilsher Dhillon

RBI not 'unduly concerned' about Russian investments in G-secs, says Das

PTI

After weeks of tension, the Reserve Bank of India gives in to some of the central government's demands while retaining its independence

Dilsher Dhillon

Need for non-collateralized reverse repo operations: SBI Report

PTI

SBI will cut interest rates on fixed deposits and term deposits by 0.25%

BI India Bureau

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