Combating Fiscal Deficit: Government To Frame Rules To Transfer Excess Reserves Of Regulators To Its Exchequer

The Union government is expected to finalise a new rule that would mandate regulatory and autonomous bodies like the SEBI to transfer surplus funds to the exchequer, reports Business Standard (BS).

Apart from Securities and Exchange Board of India (SEBI), regulators like Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA), will be asked to transfer excess reserves to the Consolidated Fund of India. The government draws money from this Fund for expenditure on welfare schemes.

“We have asked Sebi to provide details of expenses they require for their internal operations. The rest of it would go to a public account and the government can allocate funds as and when required,” a source is quoted as saying by BS.

According to a CAG report, surplus cash of Rs 6,064 crore had been accumulated by fourteen regulators and autonomous bodies as of March 2017. It was generated over time through fees charged by these bodies, unspent grants received from the government, or Budget surpluses.

A surplus transfer can help the government to meet its fiscal deficit targets and also prevent any reductions in crucial social welfare spending.

RBI’s Surplus

In December 2018, a paper co-authored by former CEA, Arvind Subramaniam, had established that the central bank has substantial excess reserves that at the minimum can be pegged at Rs 4.5 lakh crore. This could be transferred to the government for the benefit of the poor.

The Finance Ministry has long held that RBI has accumulated enormous reserves from seigniorage (profits from printing money and minting coins) far in excess of any reasonable limits. However, RBI has contested this view saying that it needed the reserves to meet any financial emergency in the country.

Also Read: Government’s Fiscal Deficit For April-November Breaches The Budgeted Target For FY19