Explanation –

Statements 1 and 3 are correct. The Reserve Bank of India (RBI) earns income through various means, including interest on holdings of domestic and foreign securities. This is a significant source of profit for the RBI, as it involves open market operations where the central bank purchases or sells bonds in the open market to regulate money supply in the economy. The Bimal Jalan Committee’s recommendations are currently used to determine the level of surplus transfer from the RBI to the government. The committee was formed to review the Economic Capital Framework (ECF) of the RBI, and it recommended a formula-based approach for surplus transfer, ensuring transparency and clarity in the process.

Statement 2 is incorrect. The primary reason the Reserve Bank of India transfers its surplus to the government is not to improve the government’s credit rating. Instead, the surplus transfer is a part of the RBI’s annual financial operations, where the excess of income over expenditure, after making adequate provisions for contingencies and reserves, is transferred to the government. This process is governed by the RBI Act, 1934, and helps in supporting the government’s finances.

Source: The Hindu