Windfall for Centre as RBI transfers whopping Rs 2.11 trillion for FY24

MUMBAI: The Reserve Bank has said its central board of directors which met here Wednesday has approved the transfer of a record Rs 2.11 trillion as surplus transfer/dividend payout to the central government for fiscal 2024. This is the highest ever profit sharing by the central bank and is more than double what the Centre had budgeted for the year at Rs 1.02 trillion.

“The central board of directors of the RBI approved the transfer of Rs 2,10,874 crore as surplus to the government for the accounting year 2023-24,” the monetary authority said in a statement.

In fiscal 2023, the RBI paid Rs 87,416 crore in dividend to the central government and the year before it was paid Rs 48,000 crore.

The central bank further said, “The transferable surplus for the year 2023-24 has been arrived at on the basis of the economic capital framework (ECF) adopted by the Reserve Bank on August 26, 2019 based on the recommendations of the panel headed by former RBI governor Bimal Jalan.”

Aditi Nayar, the chief economist at Icra Ratings, said the profit transfer of Rs 2.11 trillion is well above the budgeted figure of Rs 1.5 trillion in the interim budget for FY25 under dividends and profits, which includes dividends from central government units.

“The higher-than-budgeted surplus transfer would help boost the government’s resource envelope in FY25, allowing for enhanced expenditure or a sharper fiscal consolidation than what was pencilled into the interim budget,” she said.

Reacting to the surprise news, the benchmark 10-year bond yields dropped 4 basis points to 7% after the announcement as the market is expecting the government to borrow lower than budgeted as the amount is more than double — 118 percent to be precise — what was budgeted.

The 608th meeting of the central board, held under the chairmanship of the governor Shaktikanta Das, has reviewed the global and domestic economic scenario, including risks to the outlook. The board also approved the RBI annual report and financial statements for FY24.