RBI approved to give Rs 57,128 crore to the government as surplus for the accounting year 2019-20.
The Reserve Bank of India today approved to give Rs 57,128 crore to the government as surplus for the accounting year 2019-20. In the 584th meeting of the Central Board of the Reserve Bank of India, the decision of surplus transfer was taken, after maintaining the Contingency Risk Buffer at 5.5 per cent, said a statement by RBI. However, the surplus transfer in the last fiscal fell steeply in comparison to the previous year. For the accounting year 2018-19, the central bank had transferred a surplus of Rs 1.76 lakh crore to the government. Low earnings from bond holdings and unavailability of one time-gains unlike the previous year are likely to be the major reason behind low surplus transfer in the last fiscal.
Today’s decision to transfer the surplus of nearly Rs 57,000 crore is in-line with the street estimates and the government’s expectations. The government had budgeted Rs 60,000 crore as dividend to bridge its fiscal deficit, while the economists had expected the dividend transfer to be relatively muted this year.
“With tax collections for the first quarter being muted by more than 30 per cent and nearly 80 per cent of the annual fiscal deficit target already utilised, the government is exploring all possible options to raise revenues,” Divakar Vijayasarathy, Founder and Managing Partner, DVS Advisors LLP, told Financial Express Online. RBI has decided to retain the contingency risk reserve at 5.5% which is the lower end of the recommendation of Bimal Jalan committee, he added. Considering the twin factors of the current pandemic and that the dividend may not bring down the borrowing requirement of the government substantially, the board could have gone on to increase the Contingency risk reserve to 6.5 per cent, he further said.
The Board also reviewed the current economic situation; continued global as well as domestic challenges; and monetary, regulatory, and other measures taken by the RBI to alleviate the economic impact of COVID-19 pandemic. The Board mulled over the proposal of setting up an Innovation Hub and approved the Annual Report and Accounts of the RBI for the year 2019-20.
Meanwhile, the surplus transfer from the RBI to the government became a hot debate last year when the central bank transferred two components — Rs 1.23 lakh crore of surplus for the year 2018-19 and an additional Rs 52,637 crore of excess provisions according to the revised economic capital framework recommended by the Bimal Jalan committee — to the central government. While the opposition party criticised the government to be stealing from the RBI, saying that the government was clueless about how to solve their self-created economic disaster, the All India Bank Employees Association accused the government of dismantling one more autonomous institution.