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How much equity capital should a central bank hold?

Author

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  • Patnaik, Ila

    (National Institute of Public Finance and Policy)

  • Pandey, Radhika

    (National Institute of Public Finance and Policy)

Abstract

The mechanism to calculate how much reserves the RBI transfers to the Central Government has been at the forefront of debate amongst experts and policy makers. The present legal framework allows the RBI to choose what proportion of reserves it transfers to the Government. As a consequence, it has built up reserves that are higher than most other central banks hold. This paper presents the logic for why central banks might hold reserves. Drawing on cross country practices, it presents a discussion of the possible arrangements for transfer of reserves to the Government. Any institutional arrangement to determine a framework for reserves transfer must consider these options.

Suggested Citation

  • Patnaik, Ila & Pandey, Radhika, 2019. "How much equity capital should a central bank hold?," Working Papers 19/262, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:19/262
    Note: Working Paper 262, 2019
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    References listed on IDEAS

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    1. Ministry of Finance, Government of India,, 2016. "Economic Survey 2015-16," OUP Catalogue, Oxford University Press, number 9780199469284.
    2. Mukherjee, Sacchidananda, 2019. "Exploring Low-Carbon Energy Security Path for India: Role of Asia-Pacific Energy Cooperation," Working Papers 19/259, National Institute of Public Finance and Policy.
    3. Camelia, BALTARETU, 2016. "A Review Of Theoretical Approaches About Seigniorage," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 1(1), pages 82-88.
    4. Chakraborty, Lekha S, 2019. "Indian Fiscal Federalism at the Crossroads: Some reflections," MPRA Paper 93516, University Library of Munich, Germany.
    5. David Archer & Paul Moser-Boehm, 2013. "Central bank finances," BIS Papers, Bank for International Settlements, number 71, October –.
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    Cited by:

    1. Mukherjee, Sacchidananda, 2019. "State of Public Finance and Fiscal Management in India during 2001-16," Working Papers 19/265, National Institute of Public Finance and Policy.
    2. Gupta, Manish & Chakraborty, Pinaki, 2019. "State Finance Commissions: How successful have they been in Empowering Local Governments?," Working Papers 19/263, National Institute of Public Finance and Policy.

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