RBI board approves transfer of record $25 billion to government

The board of the Reserve Bank of India (RBI) has approved the transfer of a record ₹2.11 trillion (about $25 billion), more than double of what was budgeted, as surplus to the central government for the accounting year 2023-24, the central bank said on Wednesday.

The government had budgeted for ₹1.02 trillion in dividends from the Reserve Bank and other state-run banks. Last year, the RBI transferred ₹874.2 billion to the government.

The higher RBI dividend is expected to help the new government that is expected to come in next month fund the fiscal deficit of 5.1% of gross domestic product in the current fiscal. The windfall is also expected to boost government spending to spur growth.

The central bank computed the transferable surplus for the year (2023-24) on the basis of an Economic Capital Framework (ECF) that was adopted on 26 August 2019, RBI said in a statement.

An expert panel to review the extant ECF had recommended that the risk provisioning under the Contingent Risk Buffer (CRB) be maintained within a range of 6.5 to 5.5 per cent of the RBI’s balance sheet, it said.

During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of Covid-19 pandemic, the board maintained the CRB at 5.50% of the Reserve Bank’s balance sheet size to support growth and overall economic activity.

“With the revival in economic growth in FY 2022-23, the CRB was increased to 6%. As the economy remains robust and resilient, the board has decided to increase the CRB to 6.5% for FY2023-24. The board thereafter approved the transfer of ₹2,10,874 crore as surplus to the central government for the accounting year 2023-24,” RBI said.

Apart from governor Shaktikanta Das, deputy governors Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar, Swaminathan J. and other directors of the central board – Satish K. Marathe, Revathy Iyer, Anand Gopal Mahindra, Venu Srinivasan, Pankaj Ramanbhai Patel and Ravindra H. Dholakia – attended the meeting.

Ajay Seth, secretary in the Department of Economic Affairs, and Vivek Joshi, secretary in the Department of Financial Services, also attended the meeting.