In an attempt to aid the slowing Indian economy, the Reserve Bank Of India has decided to give Prime Minister Narendra Modi’s government Rs 1.76 lakh crore by way of dividends and transfer of its surplus cash reserves. The top bank on Monday declared that its central board has accepted the decision to transfer the aforementioned amount to the government on recommendations of Bimal Jalan-panel.
The RBI bonanza includes Rs 1,23,414 crore of dividends that are due from the previous financial year 2018-19, and Rs 52,637 crore of excess funds. For facts, RBI is supposed to transfer surplus funds to the government every year to help it secure funds for the development of the country. RBI this year reportedly, has maintained record surplus after it intervened in both forex and money markets.
Funds Will Help Balance The Fiscal Deficit
The additional funds that will be infused in the government’s treasury will help it to not only prop up the economy but also balance its fiscal deficit. The RBI before taking the decision realized that the government’s equity has been looming at 6.8%, above the recommended (between 5.5% and 6.5%) percentage.
Following this, the RBI board decided to bring back the equity at 5.5% and transfer the mentioned amount to the government. The government with the help of the same, can balance the difference between assets and liabilities while assuring the shortfall in revenue collections is kept under check. “We see this as a positive move for sectors like banking, infrastructure, cement and metals.” Bloomberg cited Shubhada Rao, chief economist at Yes Bank, as saying.
Recapitalisation Of PSU Banks
The decision notably comes days after the Finance Minister Nirmala Sitharaman announced the recapitalisation of state-run banks with a whopping Rs. 70,000 crore. The attempt is to infuse more funds in the market and making credits available to India Inc.