New Delhi: The board of the Reserve Bank of India approved the transfer of Rs 57,128 crore surplus funds to the government Friday, the central bank said in a statement.

However, the surplus from RBI, in line with the Rs 60,000 crore estimated in the Union Budget 2020-21, is unlikely to provide any additional fiscal space to the government, which is struggling with a sharp contraction in tax revenues on account of the Covid-19 pandemic and the loss of economic activity under the lockdown.

“The board discussed various areas of operations of the bank during the last year and approved the annual report and accounts of the Reserve Bank for the year 2019-20. The board also approved the transfer of Rs 57,128 crore as surplus to the central government for the accounting year 2019-20, while deciding to maintain the contingency risk buffer at 5.5 per cent,” the statement read. 

The online board meeting, headed by Governor Shaktikanta Das, was also attended by independent board members, the three RBI deputy governors and the two government representatives — Economic Affairs Secretary Tarun Bajaj and Financial Services Secretary Debasish Panda.

Practice of surplus transfer

Last year, the RBI had transferred Rs 1.76 lakh crore to the government following the recommendations of the Bimal Jalan committee, which had been constituted to look into the its economic capital framework.

The Bimal Jalan committee was constituted in December 2018, following a year-long open battle between the RBI, under then-governor Urjit Patel, and the government over the issue of surplus transfer. The central bank argued that the reserves are important for it to act quickly to ensure financial stability. It was one of the differences that eventually led to Patel’s exit — he resigned nine months before the end of his tenure in December 2018.

With the RBI not paying any interim dividend in 2019-20, in line with the recommendation of the Jalan panel, the entire Rs 57,128 crore surplus will be accounted for in the current fiscal. 

The practice of interim dividend — the RBI paying some amount to the government in February-March before the closure of its books in June — to help ease the government’s fiscal position was followed for the last few years.

Revenue shock

Data released by the Controller General of Accounts showed that both tax and non-tax revenues contracted sharply in the April-June quarter due to the Covid-induced lockdown.

Aditi Nayar, principal economist at ICRA Ltd, said in a note: “The surplus to be transferred by the RBI to the central government mildly trails the budgeted amount. However, this shortfall pales in comparison with the Covid-induced revenue shock from tax and non-tax revenues and disinvestment proceeds.”Nayar pointed out that the revenue shock could lead to a shortfall of Rs 6 lakh crore from the government’s estimates in the budget.