The amount, Rs52,679 crore, will provide some help to the Indian government, which proposes to bring down the fiscal deficit to 4.1% of GDP this fiscal from 4.5% last year
The Reserve Bank of India (RBI) will transfer to the Centre its surplus profit of Rs52,679 crore, about 60% more than the amount given last year.
"The Central Board of Directors of the Reserve Bank of India...Approved the transfer of surplus amounting to Rs52,679 crore for the year ended 30 June 2014 to the Government of India," the central bank said in a statement adding the transfer will take place on Monday.
Last year, the RBI had transferred its Rs33,010 crore surplus profit to the Centre.
The amount will provide some help to the government, which proposes to bring down the fiscal deficit to 4.1% of GDP this fiscal from 4.5% last year.
The Reserve Bank follows the July-June accounting year.
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Practice so far has been to give residual surplus after appropriation to central bank’s reserves. Just as ‘people get the government they deserve’, GOI and RBI can get the recommendations they ‘need’ from panels. RBI is already struggling to come out of a situation created by one such report. Yes, the reference is to the report of the Financial Sector Legislative Reforms Commission authored by Justice Srikrishna. This is not just a premature, harsh response to the beginninning of the gradual weakening of a central bank’s financial strength. Lamenting on the fall of RBI’s aggregate reserves from 11.9 per cent of balance sheet size to 10.1 per cent during the five year period ending June 2013, I had observed asunder:
“To ensure that temptations of government emanating from external compulsions do not dilute the strength of RBI’s balance sheet, GOI should take measures to augment the share capital and reserves of RBI after carrying out appropriate amendment to RBI Act. Till such time RBI should be allowed to retain surplus income by transfer to reserves. Considering the size of the balance sheet and the internal and external pressures on its income generating capabilities, as also the nature of shocks the bank has to absorb from time to time, the central bank’s reserves need to be augmented on an ongoing basis.”*
*Page 47, Banking, Reforms & Corruption: Development Issues in 21st Century India By M G Warrier([email protected])
M G Warrier, Mumbai