UPSC Mains Current Affairs for 18 June 2026

RBI Surplus Transfer: Understanding the RBI’s Growing Fiscal Role

June 18, 2026

RBI Surplus Transfer Latest News

The RBI approved a record surplus transfer of ₹2.87 lakh crore to the Union Government for FY2025-26. This is the highest-ever such transfer: FY 2024-25: ₹2.69 lakh crore; FY 2023-24: ₹2.11 lakh crore; FY 2022-23: ₹87,416 crore.
The scale of this transfer has sparked a serious debate about the evolving role of the RBI — from a monetary authority to a fiscal instrument of the government.

Background: How Does the RBI Generate Surplus

The RBI earns income through:
- Interest on government securities held in its portfolio
- Foreign exchange transactions — buying and selling currencies
- Returns on foreign assets — including gold and foreign currency holdings
- Reserve management operations — portfolio rebalancing
The RBI's balance sheet grew 20.6% in a single year to ₹91.97 lakh crore by March 2026. Gross income rose by over 26% in the same period.
The recent surplus also included gains from the RBI reportedly selling ~$12 billion worth of gold and purchasing ~$7.5 billion in foreign currency assets to manage rupee pressures.

The Economic Capital Framework (ECF): The Legal Basis

The surplus transfer is made under the Economic Capital Framework (ECF), revised in 2019 following the Bimal Jalan Committee recommendations.
The ECF defines how much capital the RBI needs to retain for risk buffers and how much surplus can be transferred to the government.
The transfer is fully within the legal framework. The concern is not legality — it is scale and systemic implication.

A Structural Shift: From Monetary Guardian to Fiscal Instrument

Traditional government financing relies on three sources:
- taxation (requires political consent),
- borrowing (disciplined by markets and repayment obligations), and
- economic growth (requires real productive capacity).
Central bank surplus transfers are fundamentally different — they generate fiscal space without new taxes, new borrowing, or real economic growth. This is what makes the current situation significant.
The ₹2.87 lakh crore transfer alone exceeds the annual budgets of several Indian States.
The concern the experts raise: when does a stabilising institution begin to act as a fiscal instrument?

India vs. Advanced Economies: A Different Path

In advanced economies like the US and EU, central banks became entangled with fiscal policy through quantitative easing — buying large quantities of government bonds to inject money into the economy.
India's case is different. Here, the fiscal-monetary link has emerged through the increasing fiscal value of central bank earnings from reserve management and foreign assets — not through bond-buying programmes.
The pathway is different, but the destination — growing fiscal dependence on the central bank — is similar.

The Federal Blind Spot: States Left Out

This is the least discussed but critically important dimension of the debate. The ₹2.87 lakh crore surplus is classified as non-tax revenue of the Union Government.
It therefore falls outside the divisible pool — the pool of income tax and GST revenues that are shared with States through Finance Commission formulas.
This means:
- States get no automatic share of RBI surplus transfers
- States carry significant expenditure obligations — health, education, welfare schemes
- States face borrowing restrictions under Article 293 of the Constitution
- Yet one of the largest public sector resource transfers in recent years bypasses fiscal federalism entirely
The analysts are careful to note that States have no legal claim to RBI profits.
But the question they raise is deeper: should a central institution acting on behalf of the entire monetary union indirectly deepen fiscal centralisation without any framework of accountability or federal balance?

The Centralisation Pattern: A Bigger Picture

Viewed in isolation, the RBI surplus transfer appears routine. But placed alongside other fiscal instruments, a pattern emerges:
- Cesses and surcharges — collected by the Centre but kept outside the divisible pool
- RBI dividend transfers — non-tax revenue, not shared with States
- Borrowing restrictions on States under Article 293
- Finance Commission devolution — subject to political negotiation
Together, these represent a progressive shift in India's fiscal landscape towards the Centre — at the expense of cooperative fiscal federalism.

The Central Bank Independence Question

Central bank independence rests on institutional distance from the government's fiscal compulsions.
This independence is not merely a legal design — it is a question of operational culture and practice.
As surplus transfers grow larger and the government's fiscal reliance on RBI earnings deepens, maintaining that independence becomes both more difficult and more important.
The RBI currently retains substantial operational autonomy and functions within a well-defined framework. But the trend line bears watching.

Conclusion

The RBI's record surplus transfer is not a crisis — but it is a signal. A central bank increasingly relied upon as a fiscal cushion risks blurring the line between monetary independence and government financing.
Combined with the exclusion of such transfers from federal revenue sharing, it raises a question India's policymakers must eventually answer: how much fiscal work can a monetary institution be asked to carry?

Source: TH | IE

RBI Surplus Transfer FAQs

Q1: What is the RBI Surplus Transfer and why is it significant?

Ans: The RBI Surplus Transfer refers to profits transferred by the RBI to the government, with the latest RBI Surplus Transfer reaching a record level.

Q2: How does the RBI generate funds for RBI Surplus Transfer?

Ans: The RBI Surplus Transfer is funded through earnings from government securities, foreign exchange operations, reserve management and returns on foreign assets.

Q3: What role does the Economic Capital Framework play in RBI Surplus Transfer?

Ans: The Economic Capital Framework determines how much capital the RBI retains and how much can be distributed through RBI Surplus Transfer.

Q4: Why has RBI Surplus Transfer raised concerns about fiscal federalism?

Ans: RBI Surplus Transfer is classified as Union government non-tax revenue, meaning states receive no automatic share despite significant expenditure responsibilities.

Q5: How does RBI Surplus Transfer relate to central bank independence?

Ans: Growing reliance on RBI Surplus Transfer may blur the distinction between monetary policy functions and government financing, raising concerns about institutional autonomy.

Indian Seafarers: How Indian Seafarers Became a Global Maritime Workforce Power

June 18, 2026

Indian Seafarers Latest News

The US-Iran conflict and the effective closure of the Strait of Hormuz since early March 2026 has put thousands of Indian seafarers at risk in the Gulf region.
This has drawn attention to India's massive and rapidly growing maritime workforce — and its changing composition.

India's Maritime Workforce: The Big Picture

India has emerged as one of the world's top three suppliers of seafarers, alongside the Philippines and China.
- Indian seafarers (2024) - 3,07,901
- Indian seafarers (2010) - 62,267
- Growth - More than fivefold in 14 years
- Share of global workforce - ~17% (1 in 5 seafarers globally is Indian)
- Global seafaring workforce - 1.89 million

The Shift in Workforce Composition

The most significant structural change is the reversal of the officer-to-rating ratio.
- 2010 - 60 : 40
- 2024 - 35 : 65
- Global average (2024) - 45 : 55
India's ratio has moved well below the global average, indicating a workforce increasingly dominated by lower-ranked, non-officer crew — known as ratings.

Engineering vs. Nautical Crew Growth

Both engineering and nautical (non-engineering) crew have grown substantially, but nautical crew has grown much faster:
- Engineering crew - 25,844 (2010); 1,00,792 (2024) - ~4x growth
- Nautical crew - 36,423 (2010); 2,07,109 (2024) - ~5.7x growth

What Kind of Work Are Indians Doing at Sea

In 2024, half of the non-engineering Indian crew worked in roles such as cooks, hospitality staff, salon ratings, cruise vessel staff, wipers, cleaners, painters, and lookout staff.
- In 2010, less than 37% were in such roles.
This signals a downward shift in the skill profile of India's maritime workforce.
Not all the growth is at the bottom. There has been notable expansion in mid-level non-officer positions too:
- Bosuns (senior-most non-officer deckhands): 0 in 2010 → 4,324 in 2024
- Able Seamen: 708 in 2010 → 16,568 in 2024

Decline in Officer Representation

In 2010, nearly 46% of non-engineering Indian crew held the rank of Third Officer or above.
By 2024, this had fallen to under 20% — as Indians increasingly joined ships in non-officer capacities.

Indian Seafarers on Foreign Ships: The Dominance of Foreign Flags

Most Indian seafarers work on foreign-flagged vessels — a trend that has deepened over time:
- 2016 - 1,23,729 out of 1,43,940 (86%)
- 2024 - 2,78,466 out of 3,07,901 (90%)
This structural dependence on foreign-flagged ships makes Indian seafarers disproportionately exposed to risks in hostile maritime environments — with limited protection from the Indian state.

The Hormuz Crisis and Indian Seafarers at Risk

The US-Iran war and the Hormuz closure brought this vulnerability into sharp focus:
- Mid-March 2026: 23,000 Indian seafarers facing uncertainty in the Gulf region; 753 aboard 27 Indian-flagged vessels
- June 11, 2026: Numbers reduced to 18,000 under uncertainty; 562 aboard 13 Indian-flagged vessels — 329 in the Persian Gulf (west of Hormuz) and 233 in the Gulf of Oman (east of Hormuz)
- The 13 Indian-flagged vessels included crude oil tankers, container ships, bulk carriers, LPG tankers, chemical tankers, and a dredger
- At least one tanker safely exited the Strait on June 15, following the peace deal announcement
EAM Jaishankar formally protested attacks on ships carrying Indian sailors, and the US responded that violations would not be tolerated.

Key Concerns Emerging from These Trends

Skill downgrade risk: India is supplying a growing share of low-skill, non-officer crew. Without active skilling efforts, India risks losing its competitive edge at higher officer ranks to countries like the Philippines and China.
Dependence on foreign flags: 90% of Indian seafarers work on foreign-flagged ships. This limits India's ability to protect them diplomatically in hostile maritime zones.
Geopolitical vulnerability: As one of the world's largest suppliers of maritime labour, disruptions in key chokepoints like the Strait of Hormuz have an outsized impact on Indian workers and their families.
Remittance and economic stakes: Indian seafarers are significant remittance earners. Their safety and employment conditions directly affect household incomes, especially in coastal states like Kerala, Goa, Maharashtra, and Andhra Pradesh.

Conclusion

India's rise as a global maritime labour power is remarkable — but its foundation is shifting.
A workforce growing fastest at the lower end of the skill ladder, overwhelmingly employed on foreign ships, and exposed to geopolitical flashpoints like Hormuz, demands a serious national maritime skilling and diplomatic protection strategy.

Source: IE | IE

Indian Seafarers FAQs

Q1: How significant are Indian Seafarers in the global maritime workforce?

Ans: Indian Seafarers constitute about 17% of the global seafaring workforce, making Indian Seafarers one of the largest maritime labour groups worldwide.

Q2: What major workforce shift has occurred among Indian Seafarers?

Ans: Indian Seafarers are increasingly concentrated in rating and non-officer roles, reflecting a growing share of lower-skilled positions within the maritime workforce.

Q3: Why are Indian Seafarers vulnerable during geopolitical crises?

Ans: Most Indian Seafarers work on foreign-flagged vessels, limiting India's legal and diplomatic ability to directly protect Indian Seafarers in conflict zones.

Q4: How has the Hormuz crisis affected Indian Seafarers?

Ans: The Hormuz crisis exposed thousands of Indian Seafarers to operational uncertainty, highlighting the risks faced by Indian Seafarers in strategic maritime chokepoints.

Q5: What policy measures are needed for Indian Seafarers?

Ans: India must strengthen maritime skilling, improve career progression opportunities, and enhance diplomatic protection mechanisms for Indian Seafarers working globally.

RBI’s Latest Measures to Attract NRI Deposits – Explained

June 18, 2026

NRI Deposits Latest News

The Reserve Bank of India (RBI) has temporarily withdrawn interest rate ceilings on certain FCNR(B) and NRE deposits, while also introducing a special swap facility to encourage higher foreign currency inflows from Non-Resident Indians (NRIs).

FCNR(B), NRE and NRO Accounts

India offers specialised banking accounts for Non-Resident Indians (NRIs) to facilitate savings, investments, and remittances.
Foreign Currency Non-Resident (Bank) [FCNR(B)] Account
An FCNR(B) account is a fixed deposit account maintained in foreign currency.
Key features include:
- Deposits are maintained in designated foreign currencies such as the US Dollar, Pound Sterling, Euro, Australian Dollar, Canadian Dollar, and Singapore Dollar.
- Depositors are protected from exchange rate fluctuations because both principal and interest are repaid in the same foreign currency.
- Interest earned is exempt from Indian income tax.
- Deposits are generally available for maturities ranging from one to five years.
FCNR(B) deposits are particularly attractive for NRIs seeking foreign currency returns without taking exchange rate risk.

Non-Resident External (NRE) Account

An NRE account is a rupee-denominated account used to park foreign earnings in India. Key features include:
- Deposits are made using foreign currency and converted into Indian rupees.
- Both principal and interest are fully repatriable.
- Interest income is tax-free in India.
- Available as savings, current, recurring, or fixed deposit accounts.
NRE accounts are primarily used by NRIs to maintain and manage overseas earnings in India.

Non-Resident Ordinary (NRO) Account

An NRO account is meant for managing income earned in India. Sources of funds may include Rent, Dividends, Pension, Interest income and Other domestic earnings.
Key features include:
- Account is maintained in Indian rupees.
- Interest income is taxable in India.
- Repatriation is permitted subject to prescribed limits and regulatory conditions.
NRO accounts are generally used to manage domestic income streams while residing abroad.

News Summary

The RBI has temporarily withdrawn interest rate ceilings on:
- Fresh FCNR(B) deposits with maturities between three and five years.
- Fresh NRE deposits with maturities of three years and above.
- The relaxation is effective from June 17, 2026, to September 30, 2026.
The measure is aimed at attracting larger foreign currency inflows at a time when policymakers are seeking to strengthen external sector stability and support the rupee.
The RBI has clarified that transfers from NRO accounts to NRE accounts will not qualify for the exemption.

Special Swap Facility for FCNR(B) Deposits

A key element of the RBI's strategy is the introduction of a concessional foreign exchange swap facility for FCNR(B) deposits.
Traditionally, when banks receive FCNR(B) deposits in foreign currency, they convert these funds into rupees for lending purposes.
This creates exchange rate risk because the bank must eventually repay the deposit in foreign currency.
To manage this risk, banks hedge their currency exposure, which typically costs around 2.9% to 3% annually.
Under the new arrangement, the RBI effectively absorbs a significant part of this hedging burden, reducing costs for banks and enabling them to offer higher interest rates to NRI depositors.

Sharp Increase in Deposit Rates

Following the RBI's announcement, several major banks significantly increased FCNR(B) deposit rates. Leading banks such as HDFC Bank, ICICI Bank, Axis Bank and Bank of Baroda are now offering interest rates of around 5.75% to 7% on three-to-five-year FCNR(B) deposits.
Some banks raised rates by more than 300 basis points, making FCNR(B) deposits substantially more attractive than before.
According to market experts, the yield advantage over comparable overseas deposits has widened to nearly 200-300 basis points.

Attractiveness Compared to Overseas Deposits

The revised rates have made Indian FCNR(B) deposits highly competitive relative to foreign fixed-income products. For example:
- Large US banks currently offer around 0.03% to 2% on comparable long-term certificates of deposit (CDs)
- Smaller US banks offer approximately 4% to 4.2%
- Indian FCNR(B) deposits are now offering as much as 7%
This differential has significantly improved the attractiveness of FCNR(B) deposits for NRIs, especially those residing in regions such as the Gulf where foreign interest income may not face additional taxation.

Expected Capital Inflows

Banks and analysts expect substantial inflows under the scheme. According to RBI data:
- Outstanding NRE deposits stood at around $7.94 billion in FY26.
- Outstanding FCNR(B) deposits stood at approximately $946 million.
- Goldman Sachs estimates that the latest measures could attract between $30 billion and $50 billion in inflows during 2026.
For comparison, a similar FCNR(B) mobilisation programme launched during the 2013 currency crisis generated nearly $25 billion in deposits.

Implications for the Economy

The RBI's measures are expected to:
- Strengthen foreign exchange reserves
- Improve dollar liquidity in the banking system
- Support the rupee against external pressures
- Lower funding costs for banks
- Facilitate overseas borrowing by public sector entities
At a time of global uncertainty and volatile capital flows, attracting stable NRI deposits can provide an important buffer for India's external sector.

Source: IE | TH

NRI Deposits FAQs

Q1: What is an FCNR(B) account?

Ans: It is a foreign currency fixed deposit account maintained by NRIs in designated foreign currencies.

Q2: What is the main advantage of an NRE account?

Ans: Both principal and interest are fully repatriable and tax-free in India.

Q3: What is an NRO account used for?

Ans: It is used to manage income earned in India such as rent, pension, and dividends.

Q4: Why did RBI remove the interest rate ceiling on FCNR(B) deposits?

Ans: To attract foreign currency inflows and strengthen India's external sector.

Q5: How much inflow is expected from the latest RBI measures?

Ans: Analysts estimate inflows of around $30-50 billion during 2026.