No doubt, there are persistent demands on RBI to reverse the process, but the RBI advocates direct fiscal support to development activities so as to be transparent, accountable and quantifiable rather than through monetary operations of RBI, which would tantamount to quasi-fiscal operations.
Transfer of the balance of profits, after necessary provisions, to the Central Government has been rationalised as part of the reform process in 1997. The present arrangement is governed by the objective of reaching a stipulated level of reserves in RBI’s balance sheet over a period – though the timeframe to reach the level is extended by mutual consent to accommodate immediate fiscal compulsions.