According to the RBI, higher surplus transfers to the government are an accounting issue caused by lower provisioning

Higher surplus transfers to the government are an accounting issue, says RBI 

The Reserve Bank of India(RBI) said on Friday that the significant increase in surplus money sent for the central government was “purely an accounting problem” and not related to any policy shift because risk capital provisioning was lower due to the balance sheet’s slower expansion last fiscal year.

A number of concerns have been expressed regarding the RBI’s decision to send Rs 99,122 crore in excess money to the government for the nine months ending March 2021, roughly double what was budgeted earlier.According to the RBI, higher surplus transfers to the government are an accounting issue caused by lower provisioning

The government was relieved by the bigger surplus transfer from the central bank, as the GDP shrank by 7.3 per cent last fiscal year. The overall budget deficit for FY21 was 9.3%, which was 0.2 per cent lower than predicted.

“It isn’t a policy problem when it comes to the surplus transfer. It’s solely a financial issue. “During the regular post-policy-review press conference, RBI Governor Shaktikanta Das informed reporters.

His statement was in response to questions about the dramatic increase in surplus revenues allocated to the Union government.

Because the balance sheet expansion in FY21 slowed by about a fourth to Rs 3.64 lakh crore in 2020-21, Deputy Governor T Rabi Shankar highlighted that the increase in the surplus transfer is mainly attributable to decreased risk capital provisioning. In 2019-20, the balance sheet expanded by Rs 12.37 lakh crore.

The transfer from profits to contingent funds also decreased due to the slower balance sheet expansion, and the two reasons combined resulted in an increase in the surplus to the government.

It should be noted that RBI’s accounting year moved from July-June to April-March in FY21, signalling a period of transition for the central bank. This resulted in a fiscal year that lasted nine months and ended on March 31, 2021.

RBI’s revenue fell 10.96 per cent to Rs 1.33 lakh crore in the fiscal year 2020-21, while expenditure fell 63.10 per cent to Rs 34,146 crore.

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