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Higher surplus transfer to govt happened due to lower provisioning: RBI

The higher surplus transfer by the central bank came in as a big relief for the government

Topics
Reserve Bank of India | surplus cash | Centre

Press Trust of India  |  Mumbai 

RBI, Reserve Bank of India
Photo: Shutterstock

The on Friday said the huge jump in surplus funds transferred to the central government was "purely an accounting issue" and not related to any policy change, as there was lower risk capital provisioning due to a slower expansion of its balance sheet last fiscal.

Ever since RBI announced the transfer of Rs 99,122 crore surplus funds to the government for the nine-month period ended March 2021, which is nearly double of what was budgeted earlier, a slew of concerns have been raised about the move.

The higher surplus transfer by the central bank came in as a big relief for the government as the economy contracted 7.3 per cent last fiscal. The overall fiscal deficit came at 9.3 per cent for FY21, which was 0.2 per cent down from what was initially expected.

"With regard to the surplus transfer, it is not really a policy issue. It is purely an accounting issue," RBI Governor Shaktikanta Das told reporters during the customary post policy review press conference.

His response was to queries related to steep rise in surplus funds transferred to the Union government.

Deputy Governor T Rabi Shankar explained that the increase in surplus transfer is largely due to lower risk capital provisioning because the balance sheet expansion in FY21 slowed down by nearly a fourth to Rs 3.64 lakh crore in 2020-21. The balance sheet expansion had touched Rs 12.37 lakh crore in 2019-20.

Linked to the slower balance sheet expansion, the transfer from profits to contingent funds also came down and the two factors together have resulted in the surplus to the government going up.

It can be noted that FY21 was a year of transition for RBI as it shifted its accounting year to the widely used April-March format from the earlier July-June period. This resulted in a nine-month fiscal year that ended on March 31, 2021.

In FY20, the overall surplus transferred for the 12-month period that ended on March 31, 2020 stood at Rs 57,128 crore.

Fiscal year 2020-21 witnessed a 10.96 per cent decline in RBI's income at Rs 1.33 lakh crore while the expenditure was down 63.10 per cent to Rs 34,146 crore.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Fri, June 04 2021. 18:33 IST
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