After reviewing local and global economic indicators, the Reserve Bank of India (RBI) has approved a 2.11tn INR surplus transfer to the government for the 2023/2024 financial year. This reportedly outstrips the estimated margins predicted by analysts and the Indian government.
Reserve Bank Of India Approves Record High Dividend To Government
The government’s provisional 2024/2025 budget reflected a dividend of 1.02tn INR. Based on CNBC data, the RBI transferred 874.16bn INR to the government for the 2023 fiscal year.
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Analysts speculate that the RBI earned higher interest on securities and this hiked its total income. This, in turn, facilitated the all-time-high dividend payment to the government. CNBC quoted Garima Kapoor, Elara Capital senior vice president and economist, who commented:
This gives the government significant elbow room to manage any welfare spending and sustain capex spending even if the disinvestment receipts fall short.
The country’s central bank also increased the contingency risk buffer (CRB) from 6% to 6.5%. CNBC indicated that economists anticipated a surplus transfer of between 750bn INR and 1.2tn INR as India benefited from robust forex earnings. In its press release, the RBI said:
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 Board thereafter approved the transfer of ₹2,10,874 crore as surplus to the Central Government for the accounting year 2023-24.
According to CNBC information, the country’s 10-year bond yield went down to 7%, a four-basis-points drop, after the RBI’s media statement.
