RBI reserves are created out of the surplus that it makes each year from its various activities pertaining to managing the currency. Technically, the RBI reserves belong to the government but there has been no proper model of how much to transfer. For example, till 2014, the RBI was transferring nearly Rs.20,000 crore each year. Between 2014 and 2018, the RBI has transferred more than Rs.50,000 crore each year to the government each year.

In the year 2019, the Bimal Jalan Committed was appointed by the government to have a proper model for transfer of funds to the government by the RBI on a regular basis. Based on the findings of the Committee, the government has come to the conclusion that the RBI is sitting on excess reserves at this point of time. The total transfer for this fiscal year is proposed to be Rs.176,000 crore which is nearly 2.6 times the figure of Rs.68,000 crore transferred last fiscal year.

While there are no set rules, many economists do believe that the contingency reserve of the central bank for an emerging market like India should be around 15%. Post this decision, the contingency of the RBI comes down to 7%. It remains to be seen, whether this has any real implication.