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Consider the following statements regarding the Reserve Bank of India (RBI)’s dividend to the Government:
- The dividend is transferred to the Central Government only after the RBI makes provisions for its operational expenditures.
- 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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Most Upvoted Answer
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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Community Answer
Consider the following statements regarding the Reserve Bank of India ...
Explanation:
1. Provision for Operational Expenditures:
The statement that the dividend is transferred to the Central Government only after the RBI makes provisions for its operational expenditures is correct. The RBI first deducts its operational expenses, including any contingency reserves, from its annual surplus before transferring the remaining amount as a dividend to the government.
2. Fixed Amount of Dividend:
The statement that a fixed amount of dividend is transferred to the government every year is incorrect. The dividend amount transferred by the RBI to the government depends on various factors such as the RBI's profits, reserves, and the economic situation. The amount of dividend can vary from year to year and is not predetermined.
Therefore, the correct answer is option A - 1 only.
1. Provision for Operational Expenditures:
The statement that the dividend is transferred to the Central Government only after the RBI makes provisions for its operational expenditures is correct. The RBI first deducts its operational expenses, including any contingency reserves, from its annual surplus before transferring the remaining amount as a dividend to the government.
2. Fixed Amount of Dividend:
The statement that a fixed amount of dividend is transferred to the government every year is incorrect. The dividend amount transferred by the RBI to the government depends on various factors such as the RBI's profits, reserves, and the economic situation. The amount of dividend can vary from year to year and is not predetermined.
Therefore, the correct answer is option A - 1 only.
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Consider the following statements regarding the Reserve Bank of India (RBI)’s dividend to the Government: The dividend is transferred to the Central Government only after the RBI makes provisions for its operational expenditures. 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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