RBI Pumps ₹ 1.76 Lakh-Crore Into Modi Government’s Book Of Accounts

The Reserve Bank of India on Monday approved payout of INR₹ 1.76 lakh crore to the government from its surplus and reserves. A committee chaired by former Governor Bimal Jalan made recommendations to the  central bank.

The record transfer includes a surplus of INR₹ 1.23 lakh crore for 2018-19. The surplus is aimed to boost the government’s finances and expenditure. It will help the government tackle the five-year low growth amidst the current economic crisis.

Economists say the payout will likely help the government meet its tax revenue shortfall and fund higher spending.




The RBI payout is much larger than government estimates as the Government in its 2019-20 budget estimated a dividend payment of INR₹ 90,000 crore from the RBI.

This move come just in synch after the government decided to inject INR₹ 70,000 into the state-run banks, instead of spreading it over the year ending March 2020 as announced in Budget.

The RBI pays dividends to the government every year, based on the profits from its investments and printing of notes and coins.



The Finance Ministry over the past couple of years seeked higher payouts, arguing the central bank is holding more capital than it needs. Former RBI Governors Raghuram Rajan and Urjit Patel opposed transfer of the surplus to the government.

Raghuram Rajan in December last year said that the transfer of excess reserve would pull down the credit rating of the RBI from current ‘AAA’, making borrowing costlier for the central bank and have severe implication to the entire economy.

These differences between the Government and eventually led to former Governor Urjit Patel’s resignation last year.



However, the current RBI Governor Shaktikanta Das has a different view on the issue. He said that it is the government’s prerogative to decide on the usage of the surplus and dividend payout.


Source : Various


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