Take the pledge to vote

For a better tommorow#AajSawaroApnaKal
  • I agree to receive emails from News18

  • I promise to vote in this year's elections no matter what the odds are.
  • Please check above checkbox.

    SUBMIT

Thank you for
taking the pledge

Vote responsibly as each vote counts
and makes a diffrence

Disclaimer:

Issued in public interest by HDFC Life. HDFC Life Insurance Company Limited (Formerly HDFC Standard Life Insurance Company Limited) (“HDFC Life”). CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101 . The name/letters "HDFC" in the name/logo of the company belongs to Housing Development Finance Corporation Limited ("HDFC Limited") and is used by HDFC Life under an agreement entered into with HDFC Limited. ARN EU/04/19/13618
LIVE TV DownloadNews18 App
News18 English
News18 » Business
2-min read

Jalan Panel Recommends Review of Economic Capital Framework Every 5 Years

The panel was constituted by the central bank in consultation with the government to review the extant ECF of the RBI. The panel submitted its report to Governor Shaktikanta Das on August 14.

PTI

Updated:August 27, 2019, 11:18 PM IST
facebookTwitterskypewhatsapp
Reserve Bank of India HQ
File photo of Reserve Bank of India headquarters. (Picture courtesy: Twitter)
Loading...

Mumbai: The Bimal Jalan panel of the Reserve Bank has recommended that the revised economic capital framework, under which the RBI decided to transfer Rs 52,637 crore excess provisions to the government, be reviewed every five years.

The panel's report, which was released by the central bank on Tuesday, also recommended that the RBI accounting year (July-June) may be brought in sync with the fiscal year (April to March) from the financial year 2020-21 as it could reduce the need for interim dividend being paid by the RBI.

The Central Board of the RBI on Monday accepted all the recommendations of the committee headed by Jalan, a former central bank governor.

The panel was constituted by the central bank in consultation with the government to review the extant ECF of the RBI. The panel submitted its report to Governor Shaktikanta Das on August 14.

The RBI's central board on Monday approved the transfer of record Rs 1.76 lakh crore dividend and surplus reserves to the government. This comprises Rs 1,23,414 crore of surplus for the year 2018-19 and Rs 52,637 crore of excess provisions identified as per the revised ECF.

"The Committee recommended that the framework may be periodically reviewed every five years. Nevertheless, if there is a significant change in the RBI's risks and operating environment, an intermediate review may be considered," the report said.

The committee has recommended a surplus distribution policy which targets not only the total economic capital (as per the extant framework) but also the realised equity level of the RBI's capital.

"This will help bring about greater stability of surplus transfer to the Government, with the quantum of the latter depending on balance sheet dynamics as well as the risk equity positioning by the Central Board," it said.

There will be no transfer of unrealised valuation buffers and these will be used as risk buffers against market risks, it added.

The panel recognised that the RBI's provisioning be maintained within a range of 6.5 per cent to 5.5 per cent of the RBI's balance sheet, comprising 5.5 to 4.5 per cent for monetary and financial stability risks and 1 per cent for credit and operational risks.

The panel also suggested the alignment of the financial year of RBI with the fiscal year of the government for "greater cohesiveness" in various projections and publications brought out by RBI.

Further, in the following years, interim dividend to the government may be paid only under exceptional circumstances, it opined.

As per the report, the committee recognised that the RBI's financial stability risk provisions need to be viewed for what they truly are, i.e, the country's savings for a rainy day, built up over decades, and maintained with the RBI in view of its role as the Lender of Last Resort.

Its balance sheet, therefore, has to be demonstrably credible to discharge this function with the requisite financial strength, the report said.

The committee has recommended adopting the Expected Shortfall (ES) methodology (in place of the extant Stressed-Value at Risk) for measuring market risk on which there was a growing consensus among central banks as well as commercial banks over the recent years.

While central banks are seen to be adopting ES at 99 per cent confidence level (CL), the Committee recommended adoption of a target of ES 99.5 per cent CL and a range defined between the target and downward risk tolerance of 97.5 per cent (both under stress conditions).

The range is considered appropriate to address the cyclical volatility of RBI's valuation balances based on historical analysis, it said.

Get the best of News18 delivered to your inbox - subscribe to News18 Daybreak. Follow News18.com on Twitter, Instagram, Facebook, Telegram, TikTok and on YouTube, and stay in the know with what's happening in the world around you – in real time.

Read full article
Loading...
Next Story
Next Story

Also Watch

facebookTwitterskypewhatsapp
Most Active
Company Price Change %Gain
Yes Bank 64.10 -1.54
Maruti Suzuki 6,095.05 -0.58
BPCL 382.10 3.62
HDFC 1,988.30 -0.40
Reliance 1,205.70 0.69
Company Price Change %Gain
Maruti Suzuki 6,093.55 -0.61
Yes Bank 64.10 -1.61
ICICI Bank 399.15 -0.36
HDFC 1,988.75 -0.39
Tata Motors 121.85 -0.08
Top Gainers
Company Price Change %Gain
Tata Steel 358.25 3.86
BPCL 382.10 3.62
Vedanta 149.70 2.96
JSW Steel 221.40 2.41
IOC 128.15 2.36
Company Price Change %Gain
Tata Steel 358.05 3.95
Vedanta 149.45 2.68
SBI 280.50 2.41
Bajaj Finance 3,415.05 1.47
M&M 529.40 1.39
Top Losers
Company Price Change %Gain
Britannia 2,613.85 -2.92
Coal India 192.35 -2.66
ONGC 127.40 -1.77
Eicher Motors 16,030.40 -1.56
Yes Bank 64.10 -1.54
Company Price Change %Gain
Coal India 192.50 -2.58
ONGC 127.00 -2.08
Yes Bank 64.10 -1.61
Bharti Airtel 335.75 -1.21
HDFC Bank 2,186.95 -0.98

Live TV

Countdown To Elections Results
To Assembly Elections 2018 Results