RBI to transfer 25% more surplus this year to help government fight fiscal deficit

KOLKATA: Reserve Bank of India of India has decided to transfer a surplus of Rs 65,896 crore this year, which is 25% higher than previous year.

This is the highest ever given to the government and its is going to aid the government in its fight to rein in fiscal deficit. RBI had transferred Rs 52,679 crore surplus for the year ended June 30, 2014.

"This will provide more fiscal space to the government and increase planned expenditure," India Ratings Chief Economist Devendra Kumar Pant said. "This is part of non-tax receipts and will help the government bridge any shortfall it may have, especially given the fact that first quarter direct tax growth has not been very encouraging,"

Indirect tax collections also jumped 39.1% in July, partly contributed by the hike in excise duty on oil last year and a withdrawal of sops on automobile and other companies from January this year.

Transfer of surplus from RBI along with dividends from state-run banks and public sector entities comprise a significant chunk of non-tax receipts. The government has projected a fiscal deficit of 3.9% of GDP for FY16, as against 4% deficit attained in FY15.

RBI's central board approved the decision at its meeting Thursday, the central bank said in a statement. RBI's financial year closes on June 30.

"The higher fund transfer by RBI can be used by the government in recapitalizing public sector banks," CARE Ratings Chief Economist Madan Sabnavis said.

The government has announced to infuse an additional Rs 11,500 crore in public sector banks for recapitalization this fiscal, over and above the Rs 7,940 crore earmarked in the union budget.