The Reserve Bank has “more than adequate” reserves and the proposed panel to assess its holdings could identify Rs 1-3 lakh crore as excess capital, a report said on Monday.
The central board of the RBI last Monday had decided to form a committee to examine the economic capital framework (ECF) of the Reserve Bank of India.
Details of the panel that includes its members and terms of reference are likely be announced later this week.
“We expect the proposed committee on the RBI’s ECF to identify Rs 1-3 trillion (lakh crore) which are 0.5-1.6 per cent of GDP as excess capital,” analysts at Bank of America Merrill Lynch (BofAML) said in a note Monday.
The brokerage report said as per its stress tests, the central bank can transfer Rs 1 lakh crore to the government if the transfer is limited to passing excess contingency reserve (CR), going up to Rs 3 lakh crore if the revaluation reserves are included.
The CR according to RBI annual report for 2017-18 is 7 per cent of its assets, while overall reserves stand at 28 per cent. The report said CR at 7 per cent of the book is far higher than BRICS (ex India) average of about 2 per cent.
Similarly, the revaluation reserves are also on the higher side compared with BRICS central banks or that proposed by the Usha Thorat group.
The contingency fund is the provision made by the RBI to meet unexpected and unforeseen contingencies.
On the other hand, unrealised gains or losses on valuation of Foreign Currency Assets (FCA) and gold are recorded in the currency and gold revaluation account.
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. It further said this level will be 75 percent higher than the average of BRICS economies, excluding India.
