Stage set for an­other show­down be­tween RBI and gov­ern­ment

Mint ST - - NEWS -

econ­o­mist and colum­nist Indira Ra­jara­man, “seems to in­di­cate that the gov­ern­ment is look­ing to al­lay mar­ket fears. It seems the gov­ern­ment wants to con­vey that it does not plan to wipe out RBI’S cap­i­tal but is only look­ing for a rea­son­able share—any ex­cess sur­plus that can be trans­ferred.”

“In prin­ci­ple, the RBI should have on hand some in­ter­nally worked out cal­cu­la­tions of the op­ti­mal level of the three kinds of re­serves in the RBI bal­ance sheet,” she said.

Th­ese are val­u­a­tion re­serves for deal­ing with volatil­ity in for­eign ex­change hold­ings and gov­ern­ment se­cu­ri­ties, as­set devel­op­ment re­serves for tak­ing care of de­pre­ci­a­tion and other as­set-re­lated costs, and a con­tin­gency re­serve to take care of any un­fore­seen emer­gen­cies. As of June 2018, the to­tal amount in th­ese three types of re­serves ex­ceeded ₹9 tril­lion with more than ₹6.9 tril­lion in val­u­a­tion re­serves, RBI’S an­nual ac­counts show.

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