Dividend transfer from RBI
Source : Indian Express
GS II : Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

Why in News ?

The Reserve Bank of India (RBI) will transfer Rs 99,122 crore as surplus to the central government for the nine months ended March 31.

• Every year the central bank pays a dividend to the government to help with the finances from its surplus or profit.

Key Facts

• This is much higher than what most had estimated and what the government itself had budgeted for.
• Central bank has changed its accounting period aligning it with the fiscal calendar (April-March) from this year, earlier July-June calendar.
  • The transfer of nearly a trillion rupees for just nine months of operation is surprising, though it will come as a huge respite to the government.
• The surplus transfer amount is the second highest ever in any financial year.
  • In the financial year 2018-19 RBI transfer 1.76 lakh crore as dividend.
• This will offer a buffer to absorb the losses in indirect tax revenues that are anticipated in May-June 2021 due to lockdown.
• RBI’s transfer this year is as per the economic capital framework (ECF) adopted by the RBI board last year.

What is Surplus Transfer

• The surplus is usually given based on the RBI’s operations over a one-year period.
• Jalan Committee on the RBI’s economic capital intact had recommended that the RBI maintain at all times a minimum contingency risk buffer of 5.5 per cent of its balance sheet.
• As per Section 47 of the RBI Act
  • Profits or surplus of the RBI are to be transferred to the government after making various contingency provisions, public policy mandate of the RBI, including financial stability considerations.

Contingency Fund and Provision
This is a specific provision meant for meeting unexpected and unforeseen contingencies, including
1. Depreciation in the value of securities,
2. Risks arising out of monetary/exchange rate policy operations,
3. Systemic risks and any risk arising on account of the special responsibilities enjoined upon the Reserve Bank.

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