The Reserve Bank of India (RBI) on Friday said that it has decided to transfer Rs 99,122 crore as surplus to the government for the accounting period of nine-month ended March 31,(July 2020-March 2021).
The decision was taken during the 589th meeting of central board of directors of RBI under the chairmanship of governor Shaktikanta Das through video conferencing.the RBI board further decided to maintain the contingency risk buffer at 5.50 per cent.
“With the change in the Reserve Bank’s accounting year to April-March (earlier July-June), the Board discussed the working of the Reserve Bank of India during the transition period of nine months (July 2020-March 2021)… The Board also approved the transfer of Rs 99,122 crore as surplus to the Central Government for the accounting period of nine months ended March 31, 2021 (July 2020-March 2021),” RBI said.
The transfer will help the government’s finances as the country battles a furious second coronavirus wave that has seen daily infections and deaths rise to a record level. The restrictions clamped to break the chain of infections have also put a question mark on the country’s economic recovery.
The board reviewed the current economic situation, global and domestic challenges and recent policy measures taken by the Reserve Bank to mitigate the impact of the second coronavirus wave on the economy.
The government had budgeted to receive a surplus of about Rs 50,000 crore from the RBI to be accounted for in the budget for 2021-22, while in the previous full accounting year, the RBI had transferred Rs 57,128 crore as surplus.
The higher-than-expected dividend or surplus transfer to the government comes as it is expecting a sharp sequential fall in tax collections due to a severe second wave of Covid which has forced lockdowns.
Barring 2018-19, this is the highest ever transfer by the RBI in a year. In FY19, Rs 1.76 lakh crore was transferred to the government which included a one-time transfer of extra reserves.
The government is likely to find it challenging to meet its privatisation and disinvestment target of $24 billion while goods and services tax revenues are also likely to fall, a government official said.
“The government is also under pressure as it has no option to cut expenditure given that it needs to spend to spur some investment and perk up growth from record low levels that it hit last year. The dividend is welcome but the government will need more and hope divestment can deliver,” the official said.
There are two unique features about RBI’s financial statements. First, it is not required to pay income tax and second, it has to transfer to the government the surplus left over after meeting its needs. RBI’s income comes mainly through interest on the securities it holds.