RBI to sync its financial year with Government from 2020-21

The Reserve Bank of India (RBI) has reportedly planned to align its financial year with the centre. In a meeting held on Saturday (March 21, 2020), The Central Board of the RBI finalised that the fiscal year 2021 for the Central Bank will begin from April 1.

Fiscal 2019-2010 will end on June 30, 2020, while the fiscal year 2020-2021 will starts from July 1, 2020, but it will end on March 31, 2021. Thereafter, all the fiscal year will begin from April 1 every year.

According to a report, The fiscal year for the Centre begins on April 1 in ‘T’ (first year) and ends on March 31 in ‘T+1’ (second year). The fiscal year for the RBI, however, starts on July 1 in the first year and finishes on June 30 in the next year.

Meanwhile, both RBI and the Government adhere to the ‘T plus one’ system meaning the financial year stretches over two successive years. However, there is one fundamental difference.

The decision of syncing RBI’s accounting year with the Government’s financial year was made on the recommendation of an expert committee led by the former RBI Governor Bimal Jalan. The committee in its report suggested aligning the RBI’s financial year with the government’s financial year.

The committee stated that such alignment of the fiscal years of the two, the government and the RBI, would ensure that the centre will be able to provide better estimates of the projected surplus transfers to the government for the financial year for budgeting purposes.

It also found that such an exercise would reduce the need for an interim dividend that it pays to the government and would be restricted to extraordinary circumstances. This would also bring greater cohesiveness in the monetary policy projections and reports published by the RBI, which mostly use the fiscal year as the base.