Context:
The RBI has approved a record ₹2.87 lakh crore surplus transfer to the Union government for FY26. This highlights the growing fiscal role of the central bank, as earnings from foreign assets, reserve management and securities holdings increasingly support government finances.
Explanation:
- The Reserve Bank of India (RBI) is India’s central bank responsible for monetary policy, inflation control, currency management, foreign exchange reserves and financial stability.
- RBI earns income from interest on government securities, foreign currency assets, forex transactions and reserve management.
- After meeting expenses and risk provisions, the remaining amount is transferred to the Centre as surplus/dividend.
- Such transfers help the government manage fiscal deficit, borrowing needs and expenditure, but may raise debates on central bank independence.
- The RBI follows the Economic Capital Framework, revised after the Bimal Jalan Committee, to decide risk buffers and surplus transfer.
- Since RBI surplus is non-tax revenue of the Union, it is not automatically shared with States under fiscal devolution.
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RBI Surplus Transfer and Fiscal Policy Dynamics