4 Economy Areas Where RBI Surplus Must be Placed Beforehand

Here are the sectors which would be prioritized for the RBI surplus deployment so as to give a boost to the low economy.

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Few days ago, Finance Minister Nirmala Sitharaman made an announcement related to the economy slowdown in the nation including a roll-back of surcharge on FPI and domestic investors to arrest the downslide in the economy. To overcome the liquidity situation effects, the Reserve Bank of India (RBI) has come out with a giant amount of Rs 1.76 lakh crore for the government. This was an urgent need for the government as its finances were stretched. Amount of Rs 69,000 crore was earlier invested in by the government as a dividend for 2018-19. In addition to it, the amount of Rs 56,000 Crore will be as an inflow this year. The Reserve Bank of India announced decision of bringing in the great capital inflow to back the government with it. It will be adding more dividends for 2019-2020. 

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So, here are few sectors where this capital inflow should be deployed foremost to shoot up the economy figures 

  • Public Sector Banks (PSB): Although Finance Minister announced the capital of Rs 70,000 Crore to be deployed in Banks but State owned banks need much more financial support to overcome the economy trouble. The additional capital coming in through RBI would be beneficial for the state owned banks to boost up its valuations in the market. Extra inflow of capital would assist the banks to overcome any trouble for the next 6 years. 

  • Market Borrowings: According to the records, Government borrowing figures have been increasing year by year which has become a trouble in the liquidity circumstances. In fiscal year 2019-2020, Government has plans for borrowing more capital. By bringing in the capital assistance provided by RBI, will not only help in to make more funds in Private Sector but also will lower down the borrowing figures and assist in better transmission of interest rates. 

  • Development Finance Institutions: In Today’s era, deficiency of DFIs in Indian economy can be felt due to its gradual absence. Earlier DFIs used to provide financing infrastructure to the companies which was considered to be an economic assistance. But now DFIs has slowly turned into Banks due to liability mismatches. Government should forge ahead to look into the investment of big capital into infrastructure projects which would give economy boost. 

  • Support Nodal Agencies: Nodal agencies play a crucial role in the financial matters of the nation. Nodal agencies seek support in giant amount from the banks but there is rarely any refinancing support from the Nodal agencies to banks, simultaneously government help farmers, startups and small entrepreneurs by which pressure falls on the banks which leaves banks empty handed. So, Nodal agencies can be financially backed up in a sufficient way which would support the sectors of the economy.