RBI: Higher surplus transfer to govt an accounting issue, driven by lower provisioning

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The Reserve Bank of India on Friday said the jump in the surplus land fund handed over by the central government was not related to any policy change in the calculation which claimed that the last financial provision had a lower expansion capital due to a slower expansion of its balance sheet.

Concerns about the move have doubled since the Reserve Bank announced it would hand over Rs99,122 crore in surplus funds to the government in the nine months ending March 2021.

The central bank’s high surplus transfer was a huge relief to the government as the economy contracted by 7.3 percent in the last financial year. The overall fiscal deficit widened to 9.3 percent. 0.2 percent lower than initially expected.

Deputy Governor T Rabi Shankar explained that the increase in the surplus transfer was mainly due to risk capital provisioning. This is because the balance sheet development for the 21st financial year fell by a quarter to Rs3.64 lakh crore in 2020-21. The balance sheet expansion reached Rs12.37 lakh crore in 2019-20.

In connection with the slow balance sheet expansion, the transfer of profits to indefinite funds also decreased and the government surplus increased by both factors.

There are many ways to analyze accounts and transfers, often compared to the previous year. But the Reserve Bank is not just another business entity; Its goal is not to bring benefits to shareholders but to achieve financial stability, keep inflation in mind and keep growth in mind.

FY21 was a transitional year for RBI as the accounting year was changed from the previous year’s July-June to the widely used April-March format. The result is a nine-month fiscal year ending March 31, 2021. The total surplus for the 12 months ended March 31, 2020, was Rs57,128 crore.

During the financial year 2020-21, the Reserve Bank’s revenue declined by 10.96 percent to Rs1.33 lakh crore. Expenditure declined by 63.10 percent to Rs34,146 crore. Unlike corporate balance sheets, the provisions for Reserve Bank accounts are designed to meet unforeseen and unforeseen circumstances, including declining security levels, risks posed by the implementation of monetary / exchange policy, and systemic risks from central bank operations.

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