The money will come in over three years and is most likely used for regular government spending, Japanese brokerage Nomura said in report Tuesday. The Bimal Jalan committee on the appropriate economic capital framework for RBI was formed last December, and has sought a third extension to present its report which will now be next month.
“Market expectations suggest Rs 3 trillion (will be) distributed staggered over years, though we believe the ultimate transfer will be lower,” the brokerage said.
It said there is a 45 per cent probability for the money to be used for regular government spending and only 20 per cent chance that it will be used for bank recapitalisation. Recouping state-run banks’ capital buffers which have taken a beating due to the dud asset recognition is one of the most talked about uses for the excess RBI capital and is also backed for former chief economic advisor Arvind Subramaniam. Nomura gave a higher, 25 per cent probability for the money to be used for retiring public debt with the RBI, and a 10 per cent probability of no immediate transfer at all.