RBI Can Transfer Rs 1 Trillion of Excess Reserves to Government: Report

The Reserve Bank has ‘more than adequate’ reserves and that it can transfer over Rs 1 trillion to the government after a specially constituted panel identifies the ‘excess capital’, says a report.

An RBI board meeting had last Monday decided to form a committee, which is likely to be announced later this week.

“We expect the proposed committee on the RBI’s economic capital framework (ECF) to identify Rs 1-3 trillion which is 0.5-1.6 per cent of GDP as excess capital,” analysts at Bank of America Merrill Lynch said in a note.

The brokerage report said as per its stress tests, the central bank can transfer Rs 1 trillion to the government if the transfer is limited to passing excess contingency reserve and can go up to Rs 3 trillion if the total capital is included. Giving a break-up, the report said Rs 1.05 trillion can be transferred if the contingency reserve is capped at 3.5 percent of the RBI book.