RBI surplus transfer to the Central Government: Basics Explained

Last week The Reserve Bank of India (RBI) has decided to transfer a surplus of ₹99,122 crore to the central government.


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.

The RBI’s reserves consist of currency and gold revaluation account (CGRA), the investment revaluation account, the asset development fund (ADF) and the contingency fund (CF).

The CGRA makes up the chunk of the reserves;  the CF constitutes over a fourth of the RBI’s reserves. The IRA and ADF constitute a small portion of the RBI’s reserves.

The Reserve Bank of India (RBI), in 2019,  had announced its acceptance of the recommendations of the Bimal Jalan Committee with regard to the central bank’s Economic Capital Framework (ECF).

Jalan’s recommended  that Realised Equity (RE, comprising CF and Asset Development Fund or ADF) as a proportion of the total assets on the balance sheet be maintained in the 5.5%-6.5% band. The Jalan panel has chosen to opt for a lower 5.5 per cent level for the CF (as against the upper end of 6.5 per cent).

The Reserve Bank of India is the supreme monetary and banking authority in the country. It keeps the cash reserve of all scheduled banks and hence is known as Reserve Bank. It was established on April 1, 1935  .

Though originally privately owned, since nationalisation in 1949, the Reserve Bank is fully owned by the Government of India. Its main function includes; formulate, implements and monitors the monetary policy, prescribes broad parameters of banking operations within which the country’s banking and financial system functions, Manages the Foreign Exchange Management Act, 1999, Issues and exchanges or destroys currency and coins not fit for circulation, Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker. RBI Governor SHAKTIKANTA DAS

Open market operations (OMOs) is a liquidity management tool of the central bank; OMO was done to ease liquidity in the bond market. The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Purchases inject money into the banking system and stimulate growth while sales of securities do the opposite.


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