GS Paper 3:
Syllabus: Inclusive growth and issues arising out of it.
The board of Reserve Bank of India (RBI) has approved the transfer of ₹30,307 crore as surplus to the Central Government for the accounting year 2021-22.
- The board has also decided to maintain the Contingency Risk Buffer at 5.50% without quantifying the amount.
Provisions in this regard:
The RBI, founded in 1934, operates according to the Reserve Bank of India Act of 1934. The act mandates that profits made by the central bank from its operations be sent to the Centre.
- As the manager of its finances, every year the RBI also pays a dividend to the government to help with the finances from its surplus or profit.
A technical Committee of the RBI Board headed by Y H Malegam (2013), which reviewed the adequacy of reserves and surplus distribution policy, recommended a higher transfer to the government.
- Returns earned on its foreign currency assets, which could be in the form of bonds and treasury bills of other central banks or top-rated securities, and deposits with other central banks.
- Interest on its holdings of local rupee-denominated government bonds or securities, and while lending to banks for very short tenures, such as overnight.
- Management commission on handling the borrowings of state governments and the central government.
Printing of currency notes and on staff, besides the commission it gives to banks for undertaking transactions on behalf of the government across the country, and to primary dealers, including banks, for underwriting some of these borrowings.
Did you know?
In view of the RBI’s function as a lender of last resort, it needs to maintain some Contingent Risk Buffer (CRB) to insure the economy against any tail risk of financial stability crisis.
- The Jalan Committee recommended that the CRB needs to be maintained at a range of 5.5% to 6.5% of the RBI’s balance sheet.
- About RBI.
- Management of Surplus.
- RBI’s earnings and expenditure.
Discuss the mechanism under which RBI transfers surplus to the government.
[Q.3) Which of the following forms part of RBI’s earnings?
- Returns earned on its foreign currency assets.
- Interest on its holdings of local rupee-denominated government bonds or securities.
- Printing of currency notes.
Choose the correct answer using the codes given below:
- 1 and 2 only.
- 2 only.
- 2 and 3 only.
- None. ]
Sources: the Hindu.