RBI transfers almost entire surplus to govt | Business Standard News

RBI transfers almost entire surplus to govt | Business Standard News

 Online comments posted on August 12, 2014:

“It was
reasoned that government should need the fund now which is facing high fiscal
deficit that’s needed to be brought down” explains it all. Just as ‘people get
the government they deserve’, GOI and RBI get the recommendations they ‘need’
from panels. This is not just a premature, harsh response to the beginning
of the gradual weakening of a central bank’s financial strength. Lamenting on
the fall of RBI’s aggregate reserves from 11.9 per cent of balance sheet size
to 10.1 per cent during the five year period ending June 2013, I had observed
“To ensure
that temptations of government emanating from external compulsions do not
dilute the strength of RBI’s balance sheet, GOI should take measures to augment
the share capital and reserves of RBI after carrying out appropriate amendment
to RBI Act. Till such time RBI should be allowed to retain surplus income by
transfer to reserves. Considering the size of the balance sheet and the
internal and external pressures on its income generating capabilities, as also
the nature of shocks the bank has to absorb from time to time, the central bank’s
reserves need to be augmented on an ongoing basis.”*
*Page 47,
Banking, Reforms & Corruption: Development Issues in 21st
Century India By M G Warrier(samparkworld@hotmail.com)
Warrier, Mumbai


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