Former RBI governor Bimal Jalan
This refers to the report “Jalan panel seeks to convince Garg to tone down dissent note” (July 2). The message that one member in the Jalan panel is more equal than even the chairman of the panel is disturbing. Viewed from another angle, the report brings out the undercurrents that have been trying to destabilise the Reserve Bank of India’s (RBI) top management since the departure of former governor Raghuram Rajan. In this case, the effort by the finance ministry representative to prevent application of mind by the other members on the Jalan panel, who are professionals, is glaring.
The revaluation reserves that the finance secretary wants to monetise and transfer to the government of India will lead to a devaluation of the rupee. The accounting entries will result in the depletion of the value of the RBI’s gold and forex holdings in terms of dollar to the extent of the notional surplus created and transferred to the government.
The present level of the central bank’s share capital and reserves is not huge. The RBI has been using its funds for investment in shares of apex financial institutions and transferring divestment proceeds of such investments to the government mostly. Time is opportune to amend the provisions of the RBI Act to provide for raising the share capital of the RBI to the equivalent of $200 billion and enabling provisions to augment reserves out of surplus income, to a higher level than the present 7 per cent of assets.
M G Warrier, Mumbai
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