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RBI surplus transfer- as per panel norms
Why is it in the news?
- According to the Finance Minister, transfer of surplus reserves from the RBI to the government in future would depend on net income of RBI.
More in the news
- The surplus transfer would be depend on:
(1) Net income of RBI.
(2) Required realised equity’ as a per cent of RBI’s balance sheet and ‘available realised equity’ as a per cent of RBI’s balance sheet in the coming years.
(3) Other financial parameters of the central bank.
(4) The recommendations of the expert committee on excess capital.
- The surplus distribution policy of the RBI is determined in accordance with Section 47 of the RBI Act, 1934.
RBI's Balance Sheet
- RBI's balance sheet includes reserves comprising assets and earnings, which offers a cushion in times of an economic crisis.
- Most of these reserves are maintained through gold reserves and foreign exchange assets.
- The 'Surplus funds' is the amount RBI transfers to the government after meeting its own expenses.
- This surplus is basically RBI's income which it earns through interest on securities it holds.
- RBI also transfers a portion of its earnings into the Contingency Fund (CF).
Source
The Hindu.