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3) Write a note on Bimal Jalan committee that was put in place to review the economic capital framework of the Reserve Bank of India.(250 words) 

Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

3) Write a note on Bimal Jalan committee that was put in place to review the economic capital framework of the Reserve Bank of India.(250 words) 

Indianexpress

Why this question:

The Reserve Bank of India (RBI), in consultation with the government, had set up a six-member committee headed by the former RBI Governor Bimal Jalan to review the economic capital framework of the Reserve Bank of India.

Key demand of the question:

One must discuss in detail the recommendations made by the committee.

Structure of the answer:

Introduction: 

In short provide for the background that The RBI Board, which met recently decided to accept the Jalan Committee report and decided to transfer Rs 1.76 lakh crore to the government.

Body:

Explain the key recommendations of the Bimal Jamal committee – 

While giving a clearer distinction between the two components of economic capital — realized equity and revaluation balances — the committee recommended that realised equity could be used for meeting all risks/ losses as they were primarily built up from retained earnings, while revaluation balances could be reckoned only as risk buffers against market risks as they represented unrealised valuation gains and hence were not distributable.

As proposed by the panel and approved by the RBI, the entire net income can be transferable to the government only if realised equity is above its requirement. If it is below the lower bound of requirement, risk provisioning will be made to the extent necessary and only the residual net income (if any) transferred to the Government.

Conclusion:

Conclude with significance of the recommendations made.

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