The central bank of India, after a board meeting said that The Reserve Bank of India (RBI) will transfer ₹1.76 trillion to the government this fiscal.
In a statement on Monday, RBI said, the transfer will include ₹1.23 trillion of surplus for 2018-19 and ₹52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at the meeting. The reason for the higher surplus is the long-term forex swaps and the open market operations (OMO) supervised by the central bank over the last fiscal.
Under the former central bank governor, Bimal Jain, the surplus transfer was finalized in line with the recommendations of the committee. All the recommendations of the committee were accepted by the central board of the bank.
Chief economist at CARE Rating said, Madan Sabnavis, “It is a surprise to a certain extent because we had expected it to be a staggered payment to the government instead of everything in one shot. The budget expected a ₹90,000 crore surplus transfer and this extra ₹80,000 crore, to my mind, will act as a cushion against the possible shortfall in revenue collection in FY20.” He added, “Overall, I do not think that this will have inflationary pressures on the economy, since firstly, the current inflation levels are quite low and secondly, the government might not use this for spending and could instead use it to meet the possible revenue shortfall.”
According to a statement, a surplus distribution policy has been recommended by the RBI committee that targets the level of realized equity to be maintained by RBI within the overall level of its economic capital.
The former chief statistician of India, Pronab Sen, “Jalan committee has given a range of 5.5-6.5% for Contingent Risk Buffer. My worry is all governments will work at the lower range of 5.5%, like they have done it for this year. It does not give RBI very much space to manoeuvre. Keeping RBI at the rock-bottom level is not a sensible idea, but I am afraid that is what is going to happen.”