Government to Withdraw Rs 1.76 lakh crore from RBI
The withdrawal from RBI raised significantly to 1.76 lakh crores from 50000 crores in 2017-18.
The average withdrawal between 2004-2014 was approx. 20,000 crores. This average increased to 54000 crores between 2014-19.
Government to receive Rs 1.76 lakh crores from RBI as dividend. RBI made Rs 1.23 lakh crores profit in 2018-19. The amount of Rs 1.76 lakh crores includes Rs 1.23 lakh crores of profit in 2018-19 and Rs 52,637 crore of excess provisions due to change in reserves provisions as suggested by Jalan Penal.
Jalan Penal recommended that RBI should maintain a risk buffer of 5.5 to 6.5% of its balance sheet. The risk buffer helps RBI to maintain India’s monetary and financial stability.
RBI made profit in the range of Rs 15013 to 65900 crores between 2010-11 to 2017-18 which gone up to 1.23 lakh crores in the fiscal year 2018-19. This includes Rs 36000 crores of income earned in Open Market Operations.
Former Chief Economic Adviser Arvind Subramanian said in Economic Survey 2016-17 that RBI is “is already exceptionally highly capitalised” and nearly Rs 4 lakh crore of its capital transfer can be used for recapitalising banks and / or recapitalising a Public Sector Asset Rehabilitation Agency. This was opposed by then RBI Governor Raghuram Rajan. Reported by Indian Express.
When everything looks fine that why so many criticisms of the decision made by the Government?
· The withdrawal from RBI raised significantly to 1.76 lakh crores from 50000 crores in 2017-18.
· In the budget provision for dividend of around Rs 90,000 crores were made which was far less then what government is getting now.
· The average withdrawal between 2004-2014 was approx. 20,000 crores. This average increased to 54000 crores between 2014-19.
· News of economic slowdown are coming from every sector of the country as more and more sectors are reporting decline in sales. Experts says that instead of making permanent steps to get the economy back on the trek, the government is trying to make temporary arrangements with the help of this money.
· Government has no clear answer as to how the amount will be utilized.
Further Ex RBI officers also warned about the same in past.
“The immediate fiscal needs seem to take precedence over a renewed assessment of the capital needs of RBI,” Reddy had said, adding that there was merit in keeping the central bank’s balance sheet strong when the government’s fiscal balance sheet was weak. Earlier this month, Subbarao asserted that a government “trying to raid” the balance sheet of a central bank was “not a good thing”. “It shows that the government is desperate,” he had said. Reported by Indian Express.