Though the Reserve Bank of India’s transfer is a much-needed buffer for the economy, there are risks in depending on these surpluses. Analyse (200 Words)
Refer - The Hindu
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
Surplus
· The Reserve Bank of India’s decision to transfer surplus to the Centre comes as a windfall to the government, at a moment of second wave of the pandemic.
· RBI has generated a surplus that is over 73% higher than what it posted for the 12-month period , is also noteworthy.
· The RBI’s annual report, released on Thursday, shows that a sharp 63% contraction in expenditure was a major factor in boosting the surplus, especially as income fell by 11%.
Risks
· While the Reserve Bank has ensured that it maintains contingency reserves at exactly 5.5% of the overall size of its balance sheet, the level of its reserves provides little to safeguard against a unexpected financial crisis.
· The transfer from contingency fund to income is essentially an accounting arrangement to increase income.
· Even though it is transparent and formula, by Bimal Jalan committee, it doesn’t have the potential of true income.
· Further, it sends a negative signal to foreign investors and credit rating agencies.
· It would make policymakers to remember that the central bank is ultimately the lender of last resort.
· The surplus can support the government but government should not depend on RBI’s surplus to handle the financial crisis.
K. V. A 3 years
Pls review
IAS Parliament 3 years
Good attempt. Keep Writing.
Saurabh kasaudhan 3 years
Kindly review and provide suggestions
IAS Parliament 3 years
Try to explain about the risks. Keep Writing.
Cibi Siddharth 3 years
kindly review and provide suggestions mam/sir
please provide model answer sir/mam
IAS Parliament 3 years
Good attempt. Keep Writing.
S Singh 3 years
Please review.
IAS Parliament 3 years
Good attempt. Keep Writing.
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