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RBI is setting aside more money for rainy day

May 30, 2022

RBI is setting aside more money for rainy day
The surplus that the Reserve Bank of India transferred to the government in the last financial year fell strongly mainly due to a jump in expenditure, which was led by interest payments to banks on their excess funds parked with it, the bank’s annual report showed.

While income for 2021-22 increased by 20%, expenditure rose by 280%, which resulted in the overall surplus transferred to the government decreasing 69% to ₹30,307.45 crores from ₹99,122 crores in 2020-21.

Aside from the higher operational expenditure, the RBI likewise needed to pay interest on the excess funds kept by banks with it through the reverse repo window. This interest outgo almost multiplied to ₹35,601 crores toward the end of March 2022 from ₹17,958 crores a year ago.

Total expenditure in 2021-22 expanded to ₹1.29 lakh crore from ₹34,147 crores in the earlier year. Expenditure included agency commissions to banks for processing government receipts and payments, which increased by 48% to ₹3,859 crores from ₹2,611.05 crores in 2020-21. Expenditure incurred on printing of banknotes increased by 24% to ₹4,985 crores from ₹4,012.09 crores in 2020-21.

Madan Sabnavis, the chief economist at Bank of Baroda, said the national bank additionally needed to make higher provisions towards the revaluation of forex reserves. “A lower transfer to the government account implies that the government will fall short of its ₹74,000 crores collection target from RBI, banks, and other state-owned financial institutions,” Sabnavis said.

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