The Reserve Bank of India (RBI) has approved the transfer of 30,307 crore rupees as surplus to the Central Government for the accounting year 2021-22.
- The 596th Meeting of the Central Board of Directors of Reserve Bank of India was held in Mumbai on May 20 under the Chairmanship of Governor Shaktikanta Das, wherein the board approved the Annual Report and accounts of the Reserve Bank for the said year.
Lower transfer
- This is in sharp contrast to the surplus transfer of 99,122 crore rupees for nine months ended March 31, 2021 (July 2020-March 2021).
- The lower surplus transfer is due to RBI’s absorption of huge amount of liquidity from banks under the reverse repo windows and paying interest to them.
Sources of RBI’s income
- The central bank transfer the “surplus” – that is, the excess of income over expenditure – to the government, in accordance with Section 47 (Allocation of Surplus Profits) of the Reserve Bank of India Act, 1934.
The central bank’s income comes from:
- the returns it earns on its foreign currency assets, which could be in the form of bonds and treasury bills of other central banks or top-rated securities, and deposits with other central banks.
- It also earns interest on its holdings of local rupee-denominated government bonds or securities, and while lending to banks for very short tenures, such as overnight,
- From deposits with other central banks or the Bank for International Settlement or BIS,
- It claims a management commission on handling the borrowings of state governments and the central government.
Contingency Risk Buffer (CRB) /lender of last resort (LoLR)
- The RBI board also decided to maintain the Contingency Risk Buffer (CRB) at 5.50 per cent.
- CRB is the country’s savings for a ‘rainy day’ (a financial stability crisis) which has been consciously maintained with RBI in view of its role as lender of last resort (LoLR).
- As a Banker to Banks, the Reserve Bank also acts as the ‘lender of the last resort’. It can come to the rescue of a bank that is solvent but faces temporary liquidity problems by supplying it with much needed liquidity when no one else is willing to extend credit to that bank.
- The Reserve Bank extends this facility to protect the interest of the depositors of the bank and to prevent possible failure of the bank, which in turn may also affect other banks and institutions and can have an adverse impact on financial stability and thus on the economy.
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