RBi surplus to centre, rbi may earn rs 1 lakh crore surplus, how much surplus has rbi earned, why does rbi transfer surplus to centre | Economy News

The Reserve Bank of India transfers its surplus funds to the Central government every year as part of the RBI ACT guidelines. This year, the central bank is reportedly expected to transfer Rs 1 lakh crore to the Centre. The surplus helps the government to manage finances

What is RBI surplus transfer? (Photo credit: Reuters)

New Delhi: The Reserve Bank of India (RBI), the country’s central bank, is likely to transfer dividends worth nearly Rs 1 lakh crore to the Centre as part of an annual exercise. This is expected to strengthen the government’s hand to meet its expenses and lower its fiscal deficit. To be sure, the RBI has also done major heavyt lifting in terms of managing the government’s borrowings. The central bank has reportedly slashed the credit sought by the Centre using Treasury Bills by Rs 60,000 crore. These measures are aimed at helping the Centre to meet its obligations since its ability to raise funds will be constrained by the Lok Sabha elections-related code of conduct.

Why does RBI transfer funds to the Centre

Last year, the RBI transferred surplus funds worth Rs 87,416 crore to the Indian government, up 188 per cent from the surplus shared a year ago. The surplus transfer is part of section 47 of the RBI Act, 1934. To be sure, the surplus is only transferred to the government after the RBI has made the required reserve provisions for its operations. These operations include money kept aside for staff salaries and printing currency.

What are the factors that contribute to RBI’s surplus?

RBI earns a surplus from :

• Interest earned from securities held in India and abroad
• Fees and commissions earned from services offered
• Profits earned from forex transactions
• Returns received from its units

How does RBI have Rs 1 lakh crore surplus

The RBI surplus calculation was made by market experts. Union Bank of India chief economist Kanika Pasricha said the lender’s assessment shows the RBI is likely to report strong dividend earnings once again, the ET reported. ICICI Securities primary dealership head of research A Prasanna said that on subtracting total operating expenses from total income, the surplus before provisions stood at Rs 3.4 lakh crore.

After subtracting provisions worth Rs 2.2 lakh crore, the surplus stood at Rs 1.2 lakh crore, according to Prasanna. The RBI is likely to have boosted its surplus by earning higher interest on foreign exchange assets against the backdrop of an aggressive interest rate hike by the US Federal Reserve, the ET reported, citing Prasanna.