The board of the Reserve Bank of India (RBI) has given its approval for the transfer of Rs 87,416 crore as surplus to the Central government. Additionally, the board has decided to increase the contingency risk buffer from 5.5% to 6%, according to a press release by the central bank. In the previous fiscal year, the RBI had transferred Rs 30,307 crore to the government.
The board, led by Shaktikanta Das, reviewed the global and domestic economic situation in its meeting. It also discussed the challenges posed by current geopolitical developments around the world. The board further examined the performance of the RBI from April 2022 to March 2023 and approved the Annual Report and accounts for the accounting year 2022-23.
Following this news, India’s benchmark 10-year bond yield experienced a rise of 5 basis points to reach 7.01% as market participants had anticipated a surplus transfer ranging from Rs 1 to 1.5 lakh crore.
Earlier in May, it was reported that the central government is expected to receive substantial dividends from the RBI, resulting in windfall gains. This is attributed to the RBI’s profits from foreign-currency trading and lending to the local banking system due to increased borrowing by high-street lenders prompted by policy rate hikes and liquidity drainage.
According to the Budget estimates, the government anticipates receiving dividends totaling Rs 48,000 crore in the fiscal year 2023-24 from public sector banks and the RBI.
In the previous financial year, the government aimed to receive Rs 40,953 crore from the RBI and public sector financial institutions, significantly lower than the Budget Estimate of Rs 73,948 crore for the fiscal year 2022-23.
The Budget document indicates that dividends from public sector enterprises and other investments are projected to be Rs 43,000 crore for FY24 as well.
In the Revised Estimate for FY23, the dividend from public sector enterprises and other investments was higher at Rs 43,000 crore compared to the Budget Estimate of Rs 40,000 crore.