UPSC Key: RBI surplus, Minority in India and Government bond yield

Key Points to Ponder:

• What do you understand by ‘RBI dividend’ or ‘RBI surplus’?

• What are the rules regarding payment of dividend?

• How does RBI pay dividend to government?

• How much excess does RBI have now?

• Why RBI gives dividend to government?

• How does the RBI earn profits?

• What is the dividend pay-out ratio for RBI?

• How does a central bank like the RBI make profits?

• What is the nature of the arrangement between the government and RBI on the transfer of surplus or profits?

• Does the RBI pay tax on these earnings or profits?

• What is Economic Capital Framework (ECF)?

• What exactly Bimal Jalan Committee said on Economic Capital Framework (ECF)

Key Takeaways:

• The higher dividend could help improve the government’s overall fiscal position and provide greater flexibility in policy spending during an increasingly tough year ahead.

• The sharp increase in dividend pay outs was supported by the RBI’s strong earnings during the year. At the same time, the RBI raised the contingency risk buffer (CRB) to Rs 109,379 crore to create a safeguard in case geopolitical tensions escalate or crude oil prices worsen. A significant contributor to higher surplus was the central bank’s large-scale sale of US dollars in the foreign exchange market to support the rupee amid persistent depreciation pressures, leading to substantial trading gains for the RBI.

• The ongoing geopolitical tensions, conflict in West Asia, risks to energy prices, and volatility in bond and currency markets may have led the RBI to favour building a stronger CRB, analysts said.

• The record transfer is expected to provide the government, which has been facing a fiscal strain, with additional fiscal space, helping it to manage expenditure commitments, support infrastructure spending, and contain the fiscal deficit without significantly increasing borrowing.

Do You Know:

• The RBI is a “full service” central bank— not only is it mandated to keep inflation or prices in check, it is also supposed to manage the borrowings of the Government of India and of state governments; supervise or regulate banks and non-banking finance companies; and manage the currency and payment systems.

• While carrying out these functions or operations, it makes profits. Typically, the central bank’s income comes from the returns it earns on its foreign currency assets, which could be in the form of bonds and treasury bills of other central banks or top-rated securities, and deposits with other central banks.

• It also earns interest on its holdings of local rupee-denominated government bonds or securities, and while lending to banks for very short tenures, such as overnight. It claims a management commission on handling the borrowings of state governments and the central government.

Other Important Articles Covering the same topic:

📍Knowledge Nugget | RBI’s surplus transfer to govt: All you need to know for UPSC Exam

Previous year UPSC Prelims Question Covering similar theme:
1) If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? (UPSC CSE, 2020)
1. Cut and optimize the Statutory Liquidity Ratio
2. Increase the Marginal Standing Facility Rate
3. Cut the Bank Rate and Repo Rate
Select the correct answer using the code given below:
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3

Politics

VB-G RAM G: States to get funds based on finance panel model

Preliminary Examination: Current events of national and international importance.

Mains Examination: General Studies II: Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and Bodies constituted for the protection and betterment of these vulnerable sections.

What’s the ongoing story: The Centre is set to adopt the same “objective parameters” for normative allocation of funds under the Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin)  (VB–G RAM G) scheme, which were recommended by the Sixteenth Finance Commission for used for horizontal devolution among States.

Key Points to Ponder:

• Viksit Bharat—Guarantee for Rozgar and Ajeevika Mission (Gramin), or VB—G RAM G 2025-Know its key features

• What is the Mahatma Gandhi National Rural Employment Guarantee Act 2005?

• How Viksit Bharat—Guarantee for Rozgar and Ajeevika Mission (Gramin) is different from Mahatma Gandhi National Rural Employment Guarantee Act 2005?

• How Viksit Bharat—Guarantee for Rozgar and Ajeevika Mission (Gramin) is funded? How the funding is different from Mahatma Gandhi National Rural Employment Guarantee Act 2005?

• How VB – G RAM G Act will affect state exchequer?

• What is centrally sponsored scheme?

• What is the difference between centrally sponsored and central scheme?

• Viksit Bharat—Guarantee for Rozgar and Ajeevika Mission (Gramin) is centrally sponsored or central scheme?

Key Takeaways:

• The VB-G RAM G scheme will be rolled out from July 1 this year, bringing down the curtain on the two-decade-old Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

• The Ministry of Rural Development on Friday released the draft of Objective Parameters for Normative Allocation Rules, 2026, seeking public comments within 30 days. As per the draft rules, “The Central Government shall, for each financial year, determine the normative allocation of the funds for every State based on the objective parameters specified in these rules.”

• According to the draft rules, from the financial year immediately after the first year of commencement of the Act, a portion of the normative allocation, as may be determined by the central government, may also be determined on the basis of the following performance criteria — timely payment of wages; compliance with social audit requirements; the percentage of completion of works in a financial year; such other performance-related indicators as may be specified by the central government from time to time.

Do You Know:

• Departing from MGNREGA, the VB–G RAM G Act proposes a higher share of states in the funding of the rural job programme. As per the Section 22(1) of the VB-G Ram-G Act, the fund-sharing pattern between the Centre and states shall be 90:10 for the 11 states, while it will be 60:40 for all other states. Under the MGNREGA, the Centre paid the entire wage bill and shared 75% of material and administrative cost of the scheme.

• In respect of Union Territories for which horizontal devolution is not applicable, the central government shall determine the normative allocation on the basis of the performance criteria specified in sub-rule (3) of rule 4 and such other criteria as may be considered appropriate by the central government, states the draft rules.

• The formula for horizontal devolution recommended by the 16th Finance Commission is based on 6 parameters — population (2011 Census), with a weight of 17.5%, demographic performance (10% weight), area (10%), forest (10%) per capita Gross State Domestic Product Distance (42.5%) and contribution to GDP (10%).
The ministry also released draft rules for Transitional Provisions under the VB-G RAM G Act, 2025; Administrative Expenses Rules, 2026; and Grievance Redressal Rules, 2026.

• The VB G RAM G is aimed at providing a statutory guarantee of 125 days of wage employment in every financial year to every rural household whose adult members volunteer to undertake unskilled manual work.

• Unlike MGNREGS, where the Centre paid 100% of the wage bill, the VB G RAM G is a Centrally Sponsored Scheme with the fund sharing ratio of 60-40 between the Centre and States for all states and 90-10 for northeastern region states, Himalayan states and UTs with legislature and 100% central share for Union Territories (UT) without legislature.

Other Important Articles Covering the same topic:

📍How VB – G RAM G Act, which replaces MGNREGA, affects states’ finances

Previous year UPSC Prelims Question Covering similar theme:
2) Among the following who are eligible to benefit from the “Mahatma Gandhi National Rural Employment Guarantee Act”? (UPSC CSE, 2011)
(a) Adult members of only the scheduled caste and scheduled tribe households
(b) Adult members of below poverty line (BPL) households
(c) Adult members of households of all backward communities
(d) Adult members of any household

As Owaisi takes on Rijiju over Muslim numbers, a question: What’s a minority?

Preliminary Examination: Indian Polity

Mains Examination: General Studies II: Indian Constitution, Government policies and interventions for development in various sectors and issues arising out of their design and implementation

What’s the ongoing story: A war of words has erupted again between AIMIM chief Asaduddin Owaisi and Union Minister for Minority Affairs Kiren Rijiju over the status of Muslims as a minority community.

Key Points to Ponder:

• Who can be minority in India?

• What is the definition of minority under Indian laws?

• What does the Constitution say about minorities?

• Who can grant minority status in India?

• What is the purposes of Article 30 as per the Constitution of India?

• How Supreme Court of India interpreted Article 29 and Article 30 of the Indian Constitution?

• What is Section 2(c) of the National Minorities Commission Act, 1992?

• Religious and linguistic minority-Know the difference

• Minority status with the principle laid down by the Supreme Court in 2002 TMA Pai Foundation and 2005 Bal Patil Case Ruling-Know in detail

Key Takeaways:

• In response to Rijiju’s statement comparing the demographic size of Muslims with Parsis, a small minority group, Hyderabad MP Owaisi said the “minister is indulging in propaganda to deny Muslims their fundamental rights under Article 30”.

• In an interview to The Indian Express last year, Rijiju had said that “minorities receive more government support” than Hindus. “The main point we have to understand is that minority communities are receiving more funds and support from the government than the majority community, the Hindus. Whatever the Hindus get, the minorities also do. But what the minorities get, the Hindus don’t,” the minister had said.

• Earlier this week, addressing a conference of the State Minorities Commissions organised by the National Commission for Minorities in Delhi, Rijiju said, “… if we look at the Muslim population in India as a separate country, it could be the sixth-largest country”, while Parsis with a population of about 52,000 would constitute a town or a village. Still, both Parsis and Muslims have the status of minorities in the country, he said.

Do You Know:

• The Constitution does not define a “minority” even when it offers fundamental protections to them. Articles 29 and 30 safeguard the protection of the interests of minorities and the right of minorities to establish and administer educational institutions of their choice, respectively.

• The framers of the Constitution deliberately left it to the Executive to define who is a minority. However, the term minorities is constitutionally understood in two contexts: religious and linguistic. Statutorily, the National Commission for Minorities Act, 1992 provides a definition: “minority” is a community notified as such by the Central government. This law empowers the government to notify “minority communities”.

• Currently, six religious communities are recognised as minorities at the national level. These are Muslims, Christians, Sikhs, Buddhists, Parsis, who were notified in 2013, and the latest one, Jains, who were added in this list in 2014. This is a Central notification that entitles communities to benefits under government welfare schemes, including scholarships, Waqf protections, and various Ministry of Minority Affairs programmes.

Other Important Articles Covering the same topic:

📍Explained: Who is a ‘minority’ in India? What the Constitution says, how Supreme Court has ruled

Previous year UPSC Prelims Question Covering similar theme:
3) In India, if a religious sect/community is given the status of a national minority, what special advantages it is entitled to? (UPSC CSE, 2011)
1. It can establish and administer exclusive educational institutions.
2. The President of India automatically nominates a representative of the community to Lok Sabha.
3. It can derive benefits from the Prime Minister’s 15-Point Programme.
Which of the statements given above is/ are correct?
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Nation

India, Cyprus upgrades bilateral ties to Strategic Partnership

Preliminary Examination: Current events of national and international importance

Main Examination: General Studies II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

What’s the ongoing story: INDIA AND Cyprus agreed to elevate their bilateral ties to Strategic Partnership, unveiled a 5-year roadmap for defence cooperation (2026-2031), decided to establish a cyber security dialogue and strengthen cooperation on maritime transport, space and health as Prime Minister Narendra Modi met visiting President of Cyprus Nikos Christodoulides in the Capital on Friday.

Key Points to Ponder:

• Map Work-Cyprus

• Cyprus is located in which sea?

• India’s approach towards Cyprus in recent diplomacy-what you know about the same?

• India’s relations with Cyprus are guided by which core principles?

• Know the strategic importance of Cyprus in the Eastern Mediterranean.

• How India can leverage its relationship with Cyprus in the backdrop of geopolitical tensions with Turkey?

• Turkey-Cyprus rivalry-what you know about the same?

Key Takeaways:

• The two sides signed six pacts, including an MoU on establishing a joint working group on counter-terrorism, in the field of diplomatic training, on innovation and technology, establishment of official coordination and cooperation on Search and Rescue (SAR), on higher education and research and cultural cooperation from 2026-2030.

• According to top Cypriot officials, the two countries also exchanged notes on Turkey’s influence in the region as there is a shared “concern” — Turkey had backed Pakistan last year and it has a strained relationship with Cyprus.

• Officials said Cyprus is keen to procure military equipment from India, including drones and missiles, which “have been tested” last year during Operation Sindoor against Pakistan.

• India and Cyprus also agreed to speed up negotiations on the mobility pact. “Indian professionals and students residing in Cyprus are further reinforcing the bonds between our peoples. To further consolidate these ties, we have reached a consensus to conclude, at the earliest, a comprehensive Migration and Mobility Partnership, alongside a Social Security Agreement,” said PM Modi.
The two sides are also working towards the India–Middle East–Europe Economic Corridor (IMEEC) project. “We will work in tandem to ensure connectivity through key initiatives such as the Indo-Pacific Oceans Initiative and the India-Middle East-Europe Economic Corridor,” said PM Modi.

Do You Know:

• Cyprus is located close to Turkey and Syria. It’s a EU member despite being geographically in Asia. Its location makes it a crucial part of the IMEEC, an infrastructure project that India expects multiple benefits from. IMEC is supposed to boost trade and connectivity between India and Europe via the Middle East, and Cyprus, in the Mediterranean, has an important role to play.

Other Important Articles Covering the same topic:

📍From Cyprus, PM Modi on war next door: Need talks for resolution and stability

Previous year UPSC Prelims Question Covering similar theme:
4) Consider the following countries: (UPSC CSE, 2022)
1. Armenia
2. Azerbaijan
3. Croatia
4. Romania
5. Uzbekistan
Which of the above are members of the Organization of Turkic States?
(a) 1, 2 and 4
(b) 1 and 3
(c) 2 and 5
(d) 3, 4 and 5

Explained

‘For Ebola, spillover risk doesn’t equal a pandemic’

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies II: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

What’s the ongoing story: With the World Health Organization (WHO) Director-General, Dr Tedros Ghebreyesus, expressing deep concern about the speed and scale of the Ebola outbreak, the Union Health Ministry has notified screening norms and vigilance at airports and ports for those travelling from or transiting through the Democratic Republic of the Congo (DRC), Uganda and South Sudan.

Key Points to Ponder:

• What is Ebola and what causes it?

• What is the Bundibugyo strain?

• Why did WHO issue a global alert?

• How dangerous is Ebola?

• What is being done now?

• Is this a pandemic like Covid-19?

• What is Public Health Emergency of International Concern?

• Why WHO declares any outbreak a Public Health Emergency of International Concern?

Key Takeaways:

• At the World Health Assembly in Geneva, Dr Ghebreyesus flagged how rapidly the virus had spread into major urban centres, including Kampala (Uganda) and Goma (DRC), the healthcare-associated transmission and the significant population movement across porous borders. Most approved vaccines target the Zaire ebolavirus, not the Bundibugyo or Sudan strains. The WHO says vaccines require about 10 to 14 days to generate a complete immune response. So, those exposed just before or shortly after vaccination can still develop the disease.

• Dr Amesh Adalja, senior scholar at the Johns Hopkins University Center for Health Security and assistant professor – adjunct at the Johns Hopkins Bloomberg School of Public Health, however, says that “urban spread does not automatically mean sustained international spread”. He has been working on emerging infectious disease, pandemic preparedness and biosecurity.

Do You Know:

• Ebola is a zoonotic infection caused by the Orthoebolavirus family that can be extremely fatal in humans. It can spread from humans to humans through direct contact with infected fluids such as blood, saliva, sweat, tears, vomit, faeces, and breast milk among others. It can also be transmitted by touching contaminated surfaces and contact with dead bodies of those who have died of the infection. While most of the symptoms of the disease are like flu — fever, headache, muscle and joint pains — unexplained internal and external bleeding is one of the distinct features of the disease.

• The first Ebola outbreak was identified in 1976 after two successive outbreaks caused by the Sudan strain in what is now South Sudan and DRC. Since then, major outbreaks have occurred in Uganda (2000-01), West Africa (2013-16), DRC and Uganda (2018-20), and most recently in Uganda (2025).

• The one in West Africa (caused by the Zaire strain) remains the deadliest outbreak, which recorded over 28,000 cases and more than 11,000 deaths as it spread widely in Guinea, Liberia, Sierra Leone, and their neighbouring countries. Some cases were also reported in the US and Europe, which was linked to travellers and health workers travelling from Africa. According to WHO, the average fatality rate for Ebola is around 50%. This has varied from 25% to 90% in past outbreaks.

• The Bundibugyo ebolavirus causes the current outbreak; a rarer strain of Ebola first identified in Uganda in 2007. Unlike the more common Zaire strain, there are currently no approved vaccines or targeted treatments specifically designed for Bundibugyo Ebola.

• Health experts say the absence of vaccines and the spread into densely populated areas such as Kampala and Goma have heightened fears of wider regional transmission.

Other Important Articles Covering the same topic:

📍WHO declares rare Ebola outbreak in DRC and Uganda a global health emergency: All you need to know

Previous year UPSC Prelims Question Covering similar theme:
5) Consider the following statements: (UPSC CSE, 2025)
I. No virus can survive in ocean water.
II. No virus can infect bacteria.
III. No virus can change the cellular transcriptional activity in host cells.
How many of the statements given above are correct?
(a) Only one
(b) Only two
(c) All the three
(d) None

6) Among the following, which were frequently mentioned in the news for the outbreak of Ebola virus recently? (UPSC CSE, 2015)
(a) Syria and Jordan
(b) Guinea, Sierra Leone and Liberia
(c) Philippines and Papua New Guinea
(d) Jamaica, Haiti and Surinam

Why rising govt bond yields are bad news for people and businesses

Preliminary Examination: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

Mains Examination: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

What’s the ongoing story: It is becoming increasingly costly for governments across the world to borrow money. In many cases, the interest rates that lenders are charging governments are reaching their highest levels since the global financial crisis of 2008.

Key Points to Ponder:

• What is government bond yield?

• Why do governments borrow money?

• How do governments borrow money?

• What is the impact of higher yields on government bonds?

• What is the impact of lower yields on government bonds?

• What do you understand by Government Securities (G-Secs)?

• Which securities are also known as G SEC?

• What are the types of Government Securities (G-Secs)?

• What are Treasury Bills (T-bills), Cash Management Bills (CMBs), Dated G-Secs, and State Development Loans (SDLs)?

• How Treasury Bills (T-bills), Cash Management Bills (CMBs), Dated G-Secs, and State Development Loans (SDLs) are different from each other?

• How are they issued?

• What Are Open Market Operations (OMOs)?

Key Takeaways:

• What’s more, this upward shift in the interest rates demanded of various governments has been quite sharp, which is a problem all by itself, regardless of the level of interest rates. Sharply rising borrowing costs for governments imply that borrowing costs for average consumers will also rise, possibly by a greater degree.

• In most countries, governments struggle to meet their expenditures just from taxation and other revenue sources. As such, governments have to borrow money to meet the gap.

• This demand is typically higher in developing countries and lower in developed countries, simply because developed countries’ governments are more capable and efficient at raising tax revenues. Poorer countries don’t have enough people in the well-off bracket to tax.

Government bonds.

Do You Know:

• In most countries, governments struggle to meet their expenditures just from taxation and other revenue sources. As such, governments have to borrow money to meet the gap.
This demand is typically higher in developing countries and lower in developed countries, simply because developed countries’ governments are more capable and efficient at raising tax revenues. Poorer countries don’t have enough people in the well-off bracket to tax.

• In any economy, the government is the least risky borrower because it is least likely to fail in paying back. It is, after all, the government. In a crisis, it can even resort to printing money — a facility not available to businesses or households.

• However, governments borrow in a slightly different way. They float a bond — differently referred to as Treasurys in the US, Gilts in the UK, Bunds in Germany, G-Secs or government securities in India, and JGBs in Japan — which is essentially like an “I owe you” statement.

Other Important Articles Covering the same topic:

📍As war pushes up bond yields, why this raises spectre of RBI rate hike amid rupee’s crash

Previous year UPSC Prelims Question Covering similar theme:
7) Which of the following are the sources of income for the Reserve Bank of India? (UPSC CSE, 2025)
I. Buying and selling Government bonds
II. Buying and selling foreign currency
III. Pension fund management
IV. Lending to private companies
V. Printing and distributing currency notes
Select the correct answer using the code given below.
(a) I and II only
(b) II, III and IV
(c) I, III, IV and V
(d), II and V

8) Consider the following markets: (UPSC CSE, 2023)
1. Government Bond Market
2. Call Money Market
3. Treasury Bill Market
4. Stock Market
How many of the above are included in capital markets?
(a) Only one
(b) Only two
(c) Only three
(d) All four

9) Indian Government Bond Yields are influenced by which of the following? (UPSC CSE, 2021)
1. Actions of the United States Federal Reserve
2. Actions of the Reserve Bank of India
3. Inflation and short-term interest rates
Select the correct answer using the code given below.
(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3

 

PRELIMS ANSWER KEY

1.(b)  2.(d)  3.(c)  4.(c)  5.(d) 6.(b) 7.(a)  8.(b)  9.(d)

  

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