GoI To Use RBI’s Rs 1.76 Lakh Crores To Boost Indian Economy

The Reserve Bank of India (RBI,) on the 27th of August, transferred Rs. 1.76 lakh crores to the Central Government to boost the economy of India.

The RBI Central Board, on the 26th of August, conducted a board meeting and approved the transfer.  The decision to transfer the money came after a panel, led by former RBI Governor Bimal Jalan, studied the economic framework of the RBI and recommended transferring the amount.

According to the panel, after giving the funds to the Government of India (GoI,) the Bank should maintain a realized equity of 5.5 %.  As the realized equity is 6.8 % as of now, the transfer was feasible.

According to sources, out of the Rs. 1.76 lakh crores, Rs. 1.23 lakh crores are a part of the RBI’s dividend and Rs. 52,637 crores account for surplus capital.  Rs. 28,000 crores out of the total were already transferred to the Central Government in February.

The RBI’s funds will help Nirmala Sitharaman, the Finance Minister of India, to boost the economy of India and implement all the measures announced during the Budget session, on the 5th of July.

It is said, Ms. Sitharaman will specifically use the transferred money to cut down the borrowings.  However, an official announcement regarding the use of money is yet to be made.

Ms. Sitharaman, on the 27th of August, addressed the media and said, “The Ministry hasn’t yet decided on the end use of the money from the RBI. A decision will be communicated when it’s made.”

According to economists Sonal Varma and Aurodeep Nandi, India has an estimated tax revenue shortfall of Rs. 1 lakh crore.  The economists said, “Gains from excess RBI dividends are likely to be utilized to bridge the revenue shortfall rather than engage in stimulus measures.”

Nirmala Sitharaman will soon conduct a meeting with the Finance Ministry of India and top officials regarding the RBI’s funds.  She will also discuss the matter with Prime Minister Narendra Modi, following which, an announcement will be made about how the GoI will use the RBI’s funds.

Stay tuned for further updates.