Consider the following statements regarding the Reserve Bank of India (RBI)andrsquo;s dividend to the Government:1. The dividend is transferred to the Central Government only after the RBI makes provisions for its operational expenditures.2. A fixed amount of dividend is transferred to the Government every year.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?

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Consider the following statements regarding the Reserve Bank of India (RBI)’s dividend to the Government:

1. The dividend is transferred to the Central Government only after the RBI makes provisions for its operational expenditures.

2. A fixed amount of dividend is transferred to the Government every year.

Which of the statements given above is/are correct?

a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2

Correct answer is option 'A'. Can you explain this answer?

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Consider the following statements regarding the Reserve Bank of India ...

After meeting the risk provisions and other operational expenditures (salaries etc.) from the earnings of the Reserve Bank of India (RBI), the surplus is transferred to the Central Government in the form of dividends. Surplus transfer from the Reserve Bank of India is an important component of non-tax revenues to the Central Government.
However, the quantum of dividends shared with the Central Government depends upon the amount of money provided for risk provisioning, especially for the contingency funds.
There occurred a controversy regarding the excess capital reserves accumulated with the RBI and sharing of dividend with the Central Government in 2018. To sort out this controversy, a committee (Bimal Jalan Committee) was appointed to review the Economic Capital Framework. The Committee had prescribed a Contingency Risk Buffer in the range of 5.5% to 6.5% of its balance sheet.

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Consider the following statements regarding the Reserve Bank of India ...

Operational Expenditures Provision:
- The first statement is correct. Before transferring any dividend to the Central Government, the RBI makes provisions for its operational expenditures.
- The RBI deducts its operational expenses, including administrative costs, from its annual income before determining the surplus amount available for transfer as a dividend.

Fixed Amount of Dividend:
- The second statement is incorrect. Unlike a fixed amount, the dividend transferred to the Government is based on the surplus income generated by the RBI during a particular financial year.
- The surplus income is calculated as the difference between the RBI's total income (from sources such as interest on investments, foreign exchange operations, etc.) and its total expenditure.
Therefore, the correct answer is option A - 1 only. The RBI transfers its surplus income to the Government after making provisions for operational expenditures, and the dividend amount is not fixed but dependent on the annual surplus generated by the RBI.

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Consider the following statements regarding the Reserve Bank of India (RBI)’s dividend to the Government:1. The dividend is transferred to the Central Government only after the RBI makes provisions for its operational expenditures.2. A fixed amount of dividend is transferred to the Government every year.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?

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