RBI to transfer Rs 28,000 crore interim surplus to government

RBI to transfer Rs 28,000 crore interim surplus to government

1. Reserve Bank will transfer an interim dividend of Rs 28,000 crore to the government, a move that will help the Centre keep fiscal deficit in check.RBI has already transferred Rs 40,000 crore in current year (2018-19).
2. Interim dividend is a payment made during the course of a financial year.RBI is a “full service” central bank —While carrying out it’s functions or operations, it makes profits which it transfers to government according to the economic capital framework.
3. Economic capital framework refers to the risk capital required by the central bank while taking into account different risks.It reflects the capital that an institution requires or needs to hold as a counter against unforeseen risks or events or losses in the future.
4. The central bank transfers its surplus to the government in accordance with Section 47 (Allocation of Surplus Profits) of the RBI Act. The act says that the amount will be arrived at after making provision for (a) bad and doubtful debts (b) depreciation in assets, (c) contributions to staff and (d) superannuation fund.
5. RBI have constituted a committee headed by former RBI Governor Bimal Jalan to review the economic capital framework.The panel was formed after differences between the government and the central bank over RBI’s reserves.