Based on Jalan committee report, RBI transfers Rs 1.76 lakh crore to centre to combat fiscal deficit’
The Reserve bank of India (RBI) on Monday agreed to lend a helping hand to the Centre by transferring Rs 1.76 lakh crore dividend and surplus reserves to tackle the current fiscal deficit crisis. The amount includes an interim dividend of Rs28,000 crore paid in February, bank’s 2018-19 surplus of Rs 1,23,414 crore annual dividend and Rs 52, 637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at the Board meet.
It may be noted that last year the RBI had added Rs 14,190 crore to the contingency fund, but it raised doubts with former RBI governor Urjit Patel and his deputy Viral Acharya opposing saying it was an attempt to undermine the independence of the monetary authority. Hence, a committee chaired by former governor Bimal Jalan was set up to review whether the Centre had the right to dive into the RBI’s reserves and, if so, how much. The committee submitted its report last Friday recommending that the RBI’s can help the country financially in terms of crisis.
The additional amount of Rs 86,000 crore that the government will receive this year above its budgeted Rs 90,000 crore as transfers from RBI could be used in several ways. These could include providing fiscal stimulus to a sagging economy, reduce off-balance sheet borrowings or meet the expected shortfall in revenue collections.