1. The Central Bank’s Balance Sheet
The debate over the appropriate level of capital on the central bank’s balance sheet is an old one. The issue was raked up by former Chief Economic Adviser Arvind Subramanian, who argued the Indian central bank is overcapitalised.
The RBI has countered this all along and believes that its reserves need to be strong to enable it to counter any risks that may emerge in the economy. Former RBI Deputy Governor Rakesh Mohan argued that at about 20 percent of GDP, the size of the RBI balance sheet has not changed much over the years.
The government, however, feels the RBI uses too conservative a methodology to arrive at the requisite level of reserves. It thinks the RBI is sitting on excess capital of Rs 3.6 lakh crore.
For more, read this by Ananth Narayan, associate professor - finance at SPJIMR: Understanding The RBI’s Balance Sheet