Question 1

The RBI dividend is generated from the tax revenues it collects on behalf of the government.

Accepted Answer

The RBI does not collect taxes for its own revenue. Its surplus comes primarily from income on foreign exchange operations, realized gains from dollar sales, and interest earned on domestic and foreign government securities.

Question 2

The government can arbitrarily demand any amount of surplus from the RBI to fund its budget.

Accepted Answer

The surplus transfer is strictly formula-driven under the Economic Capital Framework (ECF), requiring the RBI to first maintain a Contingent Risk Buffer (CRB) of 5.5% to 6.5% of its balance sheet before transferring the remainder.

Question 3

When the value of RBI's gold or foreign currency holdings increases due to market rates, the RBI can distribute those gains to the government.

Accepted Answer

Unrealized gains (paper profits) are kept in the Currency and Gold Revaluation Account (CGRA) and cannot be distributed. Only realized equity (actual profits from completed transactions and interest) is transferable.

Question 4

Consider the following statements regarding the Reserve Bank of India's (RBI) surplus transfer:
1. Under the Economic Capital Framework, the RBI is mandated to maintain a Contingent Risk Buffer (CRB) between 5.5% to 6.5% of its balance sheet.
2. The surplus transferred by the RBI to the Central Government is classified as a Capital Receipt in the Union Budget.
3. Section 47 of the RBI Act, 1934 provides the statutory mandate for the transfer of the RBI's surplus profits to the Central Government.
How many of the above statements are correct?

Accepted Answer

(b) Only two — Statement 1 is correct: The Bimal Jalan Committee mandated a CRB of 5.5%-6.5%. Statement 3 is correct: Section 47 of the RBI Act governs the allocation of surplus profits. Statement 2 is incorrect: The RBI dividend is classified as a 'Non-Tax Revenue Receipt', not a Capital Receipt, because it neither creates a liability nor reduces an asset for the government.

Question 5

Match List I (Concepts related to RBI's Balance Sheet) with List II (Descriptions):

List I
A. Contingent Risk Buffer (CRB)
B. Economic Capital Framework
C. Seigniorage
D. Currency and Gold Revaluation Account (CGRA)

List II
1. Guidelines established by the Bimal Jalan Committee to govern surplus distribution
2. Profit made by a government from issuing currency
3. An account holding unrealized gains from fluctuations in exchange rates and gold prices
4. A specific provision made to absorb shocks from monetary and financial stability risks

Select the correct answer using the code given below:

Accepted Answer

(b) A-4, B-1, C-2, D-3 — Contingent Risk Buffer (CRB) (A-4) is the specific 5.5-6.5% buffer for monetary/financial stability risks. Economic Capital Framework (B-1) is the broader guideline set by the Bimal Jalan Committee. Seigniorage (C-2) is the profit from printing money. CGRA (D-3) holds unrealized valuation gains, which cannot be transferred to the government.

Question 6

Assertion (A): A record surplus transfer from the RBI provides the Central Government with the fiscal space to increase capital expenditure without breaching its fiscal deficit targets.
Reason (R): The RBI surplus transfer acts as a non-debt creating Capital Receipt, directly enhancing the government's borrowing limits for the fiscal year.
Select the correct answer from the codes given below:

Accepted Answer

(c) A is true but R is false. — Assertion (A) is true: A massive windfall of funds allows the government to spend more on infrastructure (capex) without widening the gap between overall expenditure and receipts (fiscal deficit). Reason (R) is false: RBI surplus transfers are classified as 'Non-Tax Revenue Receipts', not 'Capital Receipts'. They do not enhance borrowing limits; rather, they reduce the need to borrow by increasing revenue.

RBI Approves Record ₹2.69 Lakh Crore Dividend to Government

Commencement of University of Southampton India Campus