The Reserve Bank of India's (RBI) board on Wednesday approved the transfer of record Rs 2.11 lakh crore as dividend to the Central government for accounting year 2023-2024. This is the highest ever surplus paid by the central bank to the government and is a 141 per cent jump from Rs 87420 crore dividend paid in the financial year ended March 2023.
The risk provisioning under the contingent risk buffer has been hiked to 6.5 per cent of the RBI's balance sheet, from 6 per cent in FY23 to contain volatility in the financial system. The windfall will help the government hit its fiscal deficit target of 5.
1 per cent of GDP for FY25. The newly elected government would also have a higher amount to spend. The RBI distributes dividend to the government from the surplus income it earns on investments and valuation changes on its dollar holdings and the fees it gets from printing currency.
One of the main reason leading to a substantial surplus transfer this time is the notable rise in interest earnings from the RBI's foreign exchange assets, which has been driven by the US Federal Reserve's aggressive interest rate hikes in recent years. The amount of Rs. 2.
11 lakh crore is well above the budgeted figure of Rs 1.5 lakh crore in the Interim Budget for FY2025 under dividends and profits, which includes dividends from public sector institutions. The nation's benchmark 10-year bond yield dropped 4 bps to 7 per cent following this announcement.
Aditi Nayar, Chief Economist, Head Research an.
