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Committee on RBI's surplus transfer to Centre likely in a week

The composition of the committee and its terms of reference will be jointly decided by FM Arun Jaitley and RBI governor Urjit Patel; the committee will also have outside members and experts

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The committee for examining the Economic Capital Framework (ECF) to determine the Reserve Bank of India's (RBI) surplus transfers to the central government will be constituted within a week, government sources said on Tuesday.

The RBI Board on Monday had decided on an expert committee to look into the ECF.

The composition of the committee and its terms of reference will be jointly decided by Union finance minister Arun Jaitley and RBI governor Urjit Patel. The committee will also have outside members and experts, sources said.

The government feels that the surplus can be transferred to it as the accumulated reserves are far too high and not in line with global practices. Currently, the central bank has reserves of Rs 9.69 lakh crore.

The committee will look into the norms to decide on the RBI's surplus amount and a formula for transferring the money to the banks and the appropriate level of reserves the central bank should hold.

As far as micro, small and medium enterprises (MSMEs) are concerned, the detailed guidelines will be issued shortly to help credit-starved small companies, sources said. The decision in this regard, too, was taken during Monday's Board meeting.

The RBI Board had also advised the central bank to consider a scheme for the restructuring of stressed assets of MSMEs for aggregate loan size of up to Rs 25 crore. The scheme is aimed at helping the MSMEs which were hit hard by demonetisation. The RBI said the scheme would be subject to such conditions as are necessary for ensuring financial stability.

Meanwhile, the relaxation of the Capital Conservation Buffer (CCB) for banks is likely to free up Rs 37,000 crore. It will empower banks to lend Rs 3.7 lakh crore, sources said.

The Board decided to defer the implementation of the CCB norms for banks by one year until March 31, 2020.

The RBI Board will meet next on December 14 to discuss among other items the issue of liquidity crunch in the non-banking finance companies (NBFC) sector. The government feels that NBFCs, particularly the housing finance companies, are facing liquidity squeeze. It feels that immediate steps are needed to ease the liquidity crisis situation faced by the firms, particularly the real estate companies. On the contrary, RBI believes that the fund crunch is not widespread.

...& ANALYSIS

  • The composition of the committee and its terms of reference will be jointly decided by FM Arun Jaitley and RBI governor Urjit Patel; the committee will also have outside members and experts
     
  • The committee will look into the norms to decide on the RBI's surplus amount and a formula for transferring the money to the banks and the appropriate level of reserves the central bank should hold
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