BANKING AFFAIRS

Detailed explanation-1: -When a government borrows from the RBI or prints money to fill the gap between its income and expenditure, it is called deficit financing.

Detailed explanation-2: -When the revenue is more than the expenditure it is called as surplus budget whereas when the expenditure is more than the revenue it is called as deficit budget. Hence, when government revenue exceeds government expenditure, it is known as surplus budget.

Detailed explanation-3: -deficit financing, practice in which a government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds.

Detailed explanation-4: -There are two sources to finance the fiscal deficit. They are: Borrowings: internally from a commercial bank, or from external sources like the IMF, other governments, etc. Deficit financing (that is, printing new currency): borrowing funds from RBI against its securities (so, RBI prints new currency).

Detailed explanation-5: -Definition: The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government.