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Reading Comprehension Challenge - System for sharing the RBI’s surpluses with the Center

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    21 November at 09:00 AM

The gist of the passage is that a system for sharing the RBI’s surpluses with the Centre must be quickly institutionalized.

Read the following passage carefully and answer the questions given below.

The decision of the central board of the Reserve Bank of India to transfer an interim surplus of ₹28,000 crore to the Centre should come as a big relief to the Modi government. Together with the ₹40,000-crore final surplus share for 2017-18, which the Centre received in the first half, the total receipts from the RBI this fiscal will be a tidy ₹68,000 crore. For a government strapped for finances and struggling to meet the revised fiscal deficit target of 3.4% of GDP, the RBI’s largesse will be handy. The total surplus received by the Centre for 2018-19 is substantially higher than the ₹50,000 crore it got from the RBI in 2017-18, and this is the second successive year the central bank is making an interim transfer: last year it transferred ₹10,000 crore. Though there is nothing wrong in a shareholder demanding an interim dividend payout, the fact is that the Centre is advancing a receipt from the next fiscal to bail itself out in the current one. Should the RBI decide not to repeat this practice, the government’s revenues will suffer because as much as ₹82,911 crore has been budgeted on this count for the next fiscal. Again, the central bank is not like a corporate enterprise, nor can the government compare itself with a company shareholder. The RBI’s income and surplus growth cannot be measured in commercial terms since a large part of it comes from statutory functions it has to perform as a regulator.

The large payout this fiscal is bound to raise eyebrows, especially because of the recent history of conflict between the RBI and the Centre over the sharing of the former’s accumulated reserves as dividend with the Centre. Pressure on this count was said to be a major reason for the resignation of Urjit Patel as RBI Governor. Though the practice of an interim payout started under Mr. Patel, there are inevitable questions over whether there was pressure from the Centre now for the transfer of a higher sum than last year. This is because the Centre had in the Interim Budget bumped up receipts under this head from the central bank, nationalised banks and other financial institutions to ₹74,140 crore from the original estimate of ₹54,817 crore made in the 2018-19 Budget. Clearly, the Finance Ministry knew what it wanted. There will, hopefully, be a system and a structure in place once the committee under former RBI Governor Bimal Jalan, that is now reviewing the economic capital framework for the RBI, submits its report. It was constituted to de-personalize and institutionalize a system for the sharing of the RBI’s surpluses with the government and is expected to come out with its recommendations by the end of the next month.

(Source: The Hindu)

Q.1. From past how many years, the Central Government has been continuously sharing the RBI’s accumulated reserves as dividend with the Centre?

(a) One

(b) Two

(c) Three

(d) Four

 

Q.2. As per the passage, which one of the following mentioned reasons can be inferred as the best possible reason for Urjit Patel's resignation?

(a) Poor health condition of Mr. Patel

(b) Excessive pressure of work

(c) Recent conflict between the RBI and the Centre

(d) On completion of his tenure in the office

 

Q.3. Why was a committee under former RBI Governor constituted?

(a) To measure the RBI’s income and surplus growth in commercial terms since a large part of it comes from statutory functions.

(b) To review if the central bank can act as a corporate enterprise, and can the government compare itself with a company shareholder.

(c) To de-personalize and institutionalize a system for the sharing of the RBI’s surpluses with the government.

(d) To decide if the Reserve Bank of India should transfer an interim surplus to the government or not.

Answers & Explanations:

1. (b); The line from the passage clearly states this - “The total surplus received by the Centre for 2018-19 is substantially higher than the ₹50,000 crore it got from the RBI in 2017-18, and this is the second successive year the central bank is making an interim transfer” – The words ‘second successive year’ clearly states that the Central Government has twice made an interim transfer in two successive year.

2. (c); It can clearly be ascertained from the sentence - “The large payout this fiscal is bound to raise eyebrows, especially because of the recent history of conflict between the RBI and the Centre over the sharing of the former’s accumulated reserves as a dividend with the Centre. Pressure on this count was said to be a major reason for the resignation of Urjit Patel as RBI Governor.”

3. (c); Last line of 2nd paragraph gives the correct answer. “It was constituted to de-personalize and institutionalize a system for the sharing of the RBI’s surpluses with the government, and is expected to come out with its recommendations by the end of the next month.”

 

 

Important Vocabulary:

 

(i) Largesse – Generosity in bestowing money or gifts upon others.

Synonyms: Donations, Endowment, Philanthropy, Benefaction

Antonyms: Taking, Stealing, Hindrance, Hurt

Sentence Examples:

  • She is not noted for her largesse.
  • An activist for the poor, Phillip is well-known for his largesse which helps many in need.

 

(ii) Strapped – Short of money

Synonyms: Beggared, Impoverished, Fortuneless, Poor

Antonyms: Rich, Wealthy, Affluent, Well-off

Sentence Examples:

  • I'm constantly strapped for cash.
  • I was not able to pay for the food as I was strapped for cash.

 

(iii) Bump – Knock or run into someone or something with a jolt

Synonyms: Bang, Crash, Jerk, Knock

Antonyms: Praise, Soothe, Placate, Separate

Sentence Examples:

  • I almost bumped into him.
  • The car bumped along the rutted track

 

Verifying, please be patient.