RBI board approves record surplus transfer of Rs 2.11 lakh crore to government for FY24

The Reserve Bank of India’s (RBI) Central Board of Directors has approved the transfer of Rs 2.11 lakh crores as surplus to the government for the financial year 2023-24, the RBI said in a statement on May 22. This is arguably the highest ever yearly surplus transfer to the government by the Indian central bank.

The central bank said surplus transfer to government for financial year 2023-24 is based on the Economic Capital Framework (ECF) adopted by the RBI on August 26, 2019 as per recommendations of the Bimal Jalan committee. The sharp jump in the surplus amount could be attributed to higher income from the forex holding of the central bank, among other factors.

The dividend, transferred in 2024-25, is sharply higher than what the government had originally expected. The surplus transfer is for the fiscal year 2023-2024, but will reflect in the government’s account in the fiscal year 2025. The higher-than-expected surplus is good news for the central government as it would support the the centre’s liquidity surplus, and, thereafter, expenditure, experts said.

The announcement came along with an increase in the Contingent Risk Buffer (CRB) to 6.50 percent for fiscal year 2023-24.The Committee 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.

During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of Covid-19 pandemic, the Board had decided to maintain the CRB at 5.50 per cent 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 6.00 per cent. As the economy remains robust and resilient, the Board has decided to increase the CRB to 6.50 per cent for FY 2023-24,” the RBI said in a statement.

The government had budgeted a dividend of Rs 1.02 lakh crore for 2024-25. At Rs 1.02 lakh crore, the budgeted dividend revenue for the FY25 is 2.3 percent lower than the revised estimate of Rs 1.04 lakh crore for 2023-24.

The RBI was expcted to transfer Rs 85,000 crore-Rs 1 lakh crore surplus to the government in fiscal year 2025 on expectation of a higher interest income from foreign securities. But, the final figure has far exceeded the expectations. The central bank approved the dividend in the 608th meeting of the Central Board of Directors of RBI.

The meeting was attended by 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, release said.

RBI also said the meeting was also attended by Ajay Seth, Secretary, Department of Economic Affairs and Vivek Joshi, Secretary, Department of Financial Services.