‘Excess RBI cap must be used to recapitalise PSBs’

‘Excess RBI cap must be used to recapitalise PSBs’

The Bimal Jalan panel may recommend transferring up to Rs 3 lakh crore of excess Reserve Bank capital to the government and the money should be used for recapitalising struggling state-run lenders, says a report

AgenciesUpdated: Tuesday, June 11, 2019, 10:20 PM IST
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A police officer stands guard in front of the Reserve Bank of India (RBI) head office in Mumbai April 17, 2012. The Reserve Bank of India cut interest rates on Tuesday for the first time in three years by an unexpectedly sharp 50 basis points to give a boost to flagging economic growth but warned that there is limited scope for further rate cuts. REUTERS/Vivek Prakash (INDIA - Tags: BUSINESS) |

New Delhi: The Bimal Jalan panel may recommend transferring up to Rs 3 lakh crore of excess Reserve Bank capital to the government and the money should be used for recapitalising struggling state-run lenders, says a report.

The report of the six-member committee on economic capital framework for RBI headed by former governor Jalan is likely to submit its report by late this month, according to media reports.

Depending on the methodology, the panel will identify Rs 1 to 3 lakh crore or 0.5-1.5% of GDP as the excess capital, the report by economists at Bank of America Merrill Lynch said in a note Tuesday. They opined the high non-performing loans in the system do not require additional capital to be kept aside by the Reserve Bank.

"We actually welcome the use of excess RBI capital to recapitalise public sector banks to support economic recovery," they said, adding even the RBI Act allows for transfer of the capital provided the central bank maintains USD 0.7 million of reserves.

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