Topic Of The Day:-“Interim bailout: RBI surplus to govt”

A system for sharing the RBI’s surpluses with the Centre must be quickly institutionalised

The decision of the central board of the Reserve Bank of India to transfer an interim surplus of ₹28,000 crore to the Centre should come as a big relief to the Modi government. Together with the ₹40,000-crore final surplus share for 2017-18, which the Centre received in the first half, the total receipts from the RBI this fiscal will be a tidy ₹68,000 crore. For a government strapped for finances and struggling to meet the revised fiscal deficit target of 3.4% of GDP, the RBI’s largesse will be handy. The total surplus received by the Centre for 2018-19 is substantially higher than the ₹50,000 crore it got from the RBI in 2017-18, and this is the second successive year the central bank is making an interim transfer: last year it transferred ₹10,000 crore. Though there is nothing wrong in a shareholder demanding an interim dividend payout, the fact is that the Centre is advancing a receipt from the next fiscal to bail itself out in the current one. Should the RBI decide not to repeat this practice, the government’s revenues will suffer because as much as ₹82,911 crore has been budgeted on this count for the next fiscal. Again, the central bank is not like a corporate enterprise, nor can the government compare itself with a company shareholder. The RBI’s income and surplus growth cannot be measured in commercial terms since a large part of it comes from statutory functions it has to perform as a regulator.

The large payout this fiscal is bound to raise eyebrows, especially because of the recent history of conflict between the RBI and the Centre over the sharing of the former’s accumulated reserves as dividend with the Centre. Pressure on this count was said to be a major reason for the resignation of Urjit Patel as RBI Governor. Though the practice of an interim payout started under Mr. Patel, there are inevitable questions over whether there was pressure from the Centre now for the transfer of a higher sum than last year. This is because the Centre had in the Interim Budget bumped up receipts under this head from the central bank, nationalised banks and other financial institutions to ₹74,140 crore from the original estimate of ₹54,817 crore made in the 2018-19 Budget. Clearly, the Finance Ministry knew what it wanted. There will, hopefully, be a system and a structure in place once the committee under former RBI Governor Bimal Jalan, that is now reviewing the economic capital framework for the RBI, submits its report. It was constituted to de-personalise and institutionalise a system for the sharing of the RBI’s surpluses with the government, and is expected to come out with its recommendations by the end of the next month.

meanings and words

1) interim

Meaning : the intervening time(n).

Synonyms : provisional

Antonyms : finished

Example : “in the interim I’ll just keep my fingers crossed”

2) tidy

Meaning : arranged neatly and in order(adj).

Synonyms : orderly

Antonyms : unkempt

Example : “his scrupulously tidy apartment”

3) strapped

Meaning : short of money.

Synonyms : impoverished

Antonyms : rich

Example : “I’m constantly strapped for cash

4) substantially

Meaning : to a great or significant extent.

Synonyms : essentially

Antonyms : slightly

Example : “profits grew substantially”

5) enterprise

Meaning : a project or undertaking, especially a bold or complex one(n).

Synonyms : activity

Antonyms : idleness

Example : “a joint enterprise between French and Japanese companies”

6) surplus

Meaning : an amount of something left over when requirements have been met; an excess of production or supply(n).

Synonyms : excess

Antonyms : essential

Example : “exports of food surpluses”

7) statutory

Meaning : required, permitted, or enacted by statute(adj).

Synonyms : legal

Antonyms : illegal

Example : “statutory controls over prices”

8) conflict

Meaning : be incompatible or at variance; clash(v).

Synonyms : battle

Antonyms : peace

Example : “parents’ and children’s interests sometimes conflict”

9) accumulated

Meaning : gather together or acquire an increasing number or quantity of(v).

Synonyms : acquire

Antonyms : contract

Example : “investigators have yet to accumulate enough evidence”

10) inevitable

Meaning : certain to happen; unavoidable(adj).

Synonyms : imminent

Antonyms : avoidable

Example : “war was inevitable”

11) bumped

Meaning : move or travel with much jolting(v).

Synonyms : bounce

Antonyms : placate

Example : “the car bumped along the rutted track”

12) estimate

Meaning : roughly calculate or judge the value, number, quantity, or extent of(v).

Synonyms : appraisal

Antonyms : ignorance

Example : “the aim is to estimate the effects of macroeconomic policy on the economy”