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Government should amend RBI Act if it needs surplus from previous years, says its former board member YH Malegam

Updated : November 11, 2018 02:06 PM IST

If the government wants to transfer the surplus amount of the previous years then they have to amend the RBI Act, said former board member YH Malegam, adding that Reserve Bank of India (RBI) Act provides that all central bank's surplus in a year after provisions should go to the Centre.

"The Act provides that all the surplus of the Reserve Bank in any particular year has to be transferred to the government. But there is no provision, which says that any part of reserves can be paid to the centre and therefore at the maximum, which can be distributed, is the surplus for the year without making any transfer to provisions," Melagam said.

The government and the RBI on several issues including the reserves question, and a government proposal to ease the capital and lending curbs for state-run banks. The rift has widened sharply in the past few weeks and will be taken up at the RBI's forthcoming board meeting on November 19.

“There was a report made earlier which said that the bank should build up reserves equivalent to 12 percent of its net worth," said Malegam, a veteran chartered accountant who was RBI board member for 21 years, adding that Gradually, RBI has been transferring these amounts to the reserves.

Also ReadRBI board can advise and persuade the Governor, it cannot direct the Governor on substantive issues, says YH Malegam
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