Central bank's rising fiscal influence sparks independence concerns

RBI’s record ₹2.87 lakh crore surplus transfer to the Centre shows its growing fiscal significance, as earnings from reserve management and foreign assets support govt. finances; the trend raises questions about central bank independence, fiscal centralisation, and exclusion of such transfers from fiscal devolution to States

Source

The Hindu — Business →

Quick Revision

Prelims-testable facts

01The RBI's surplus transfer to the Centre for FY26 is a record ₹2.87 lakh crore.
02The surplus transfer is driven by foreign exchange gains and US Treasury yields.
03The RBI's surplus transfer provides vital fiscal space for the government.
04The trend of RBI's surplus transfer raises concerns over central bank independence.
05The RBI's Economic Capital Framework (ECF) is a framework for managing its surplus.
06The RBI's surplus transfer is not included in the fiscal devolution to States.
07The RBI's surplus transfer has increased significantly over the years, from ₹1.76 lakh crore in FY20 to ₹2.87 lakh crore in FY26.

Trap alerts

Most people think the RBI's surplus transfer is a new development, but actually it has been increasing over the years.
Most people think the RBI's surplus transfer is a one-time event, but actually it is a recurring trend.

Prelims Practice MCQs

Single facteasy

What was the record surplus transferred by the RBI to the Centre?

A.₹2.87 lakh crore
B.₹1.87 lakh crore
C.₹3.87 lakh crore
D.₹4.87 lakh crore

The RBI transferred ₹2.87 lakh crore to the Centre, a record surplus.

Multiple statementsmedium

Consider the following statements regarding RBI's fiscal role: 1. The RBI's surplus transfer to the Centre is ₹2.87 lakh crore. 2. The RBI's earnings from reserve management and foreign assets support government finances. 3. The RBI's surplus transfer to the Centre is a result of its increasing role in supporting government finances through tax collection. How many of the above statements are correct?

A.Only one
B.Only two
C.All three
D.None

Statement 1 is correct because the RBI transferred ₹2.87 lakh crore to the Centre, a record surplus. Statement 2 is correct because the RBI's earnings from reserve management and foreign assets support government finances. Statement 3 is false because the RBI's surplus transfer is not a result of tax collection, but rather its earnings from reserve management and foreign assets.

← All current affairs