Question

Q. Which of the following statements is/are correct about Surplus transfer by the Reserve Bank of India (RBI) to the central government?

Select the correct code from the options given below:

• A. 1 only
• B. 1 and 2 only
• C. 2 and 3 only
• D. 1, 2 and 3

Answer 1

The correct option is B 1 and 2 only

Explanation:

• Statement 1 is correct. A decrease in contingency risk buffer (CRB) maintained by the Reserve Bank of India (RBI), has led to an increase in Surplus transfer by RBI to the central government. Since 2018-19, the surplus transfer provision and policy has followed the Bimal Jalan Committee recommendation that CRB be kept in the range of 6.5 per cent to 5.5 per cent of the RBI’s balance sheet. CRB has declined from 7.6 per cent as of end-June 2017 and 10.3 per cent as on end-June 2011.
• Statement 2 is correct. Surplus transfer forms non-tax revenue part of the Budget. Government has more money to spend. Thus, higher surplus transfer by RBI to the central government helps in reducing the fiscal deficit.
• Statement 3 is incorrect. As the government has more money to spend, it leads to an increase in inflation.