RBI Stimulus of 1.76 Lakh Crore:

On 26 August� 2019, the Reserve Bank of India Central Board recommended to transfer of 1.76 Lakh crore (including the Rs 28,000 crore interim dividend already paid by the RBI to the Centre last fiscal) to NDA Govt. provided a much needed stimulus to the centre.

Break Up Of The Transfer Amount:

Doing this the RBI has dug deep into its reserve as the committee has decided to maintain a base threshold for Contingency Fund and also by deciding to maintain the minimum required percentage balance, transfer the surplus earnings (excess of income over expenditure) of RBI to the Government leaving with very little or no space for future negotiation.

The transfer sum comprises of Rs 1.23 lakh crore of surplus for the financial year 2018-19.Out of the surplus of Rs 1.23 lakh crore, the central bank has already transferred Rs 28,000 crore to the government as interim dividend. And Rs 52,637 crore of excess provision from Contingency Fund.

Under Section 47 of the RBI Act, "after making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and for all other matters for which provision is to be made by or under this Act or which are usually provided for by bankers, the balance of the profits shall be paid to the Central government". The RBI is not liable to pay income tax on any of its income, profits or gains.

How Will The Transferred Surplus From RBI Be Spent?

The loan from RBI may just do the trick on the fiscal management and could change the whole scenario of the grim existing economy if it is spent rationally to stimulate the economy. The Government had already budgeted Rs 90,000 crore from RBI and financial institutions. The transferred surplus will help Government to offset the deficit in tax revenues and may either spent all of it in mitigating fiscal deficit or part of it for fiscal deficit and part for bank recapitalization. Prudent usage of the transferred surplus will help to generate sustainable multiple impacts and overall growth in the economy can be attained.

Bank recapitalisation will definitely improve availability of funds for private sectors, refund of input tax credits to businesses and exporters will strengthen the financial strengths of the units and will help to generate employment as production of gods and services will boost up, clearing of dues of public sector undertakings (PSUs) will decrease borrowings from the market and stabilise the cost of supplies and also help in timely completion of projects.

As the transferred surplus is rider free, the Government has a free hand in deciding the allocation of spending to ease the fiscal woes to a great extent and boost up the economy.