India cenbank to transfer record surplus of 2.69 trln rupees to government for FY25
MUMBAI, May 23 (Reuters) - The Reserve Bank of India's board approved the transfer of 2.69 trillion rupees ($31.53 billion) as surplus to the federal government for the fiscal year ended March as it opted to raise its contingency risk buffer under a revised economic capital framework, it said on Friday.
The government had budgeted a dividend of 2.56 trillion rupees from the Reserve Bank of India, state-run banks and other financial institutions, according to budget estimates for the fiscal year 2025/26 in February.
Analysts' estimates however, had ranged between 2.7 trillion rupees and 4 trillion rupees. In fiscal year 2024, the RBI had transferred a surplus of 2.11 trillion rupees.
The lower-than-expected transfer follows a change in the range of contingency risk buffer that the central bank can maintain to 6% +/-1.5%. The buffer was to be maintained between 5.5% to 6.5% previously.
"We believe that the revision in ECF with hike in buffers to 6% +/-1.5% is very prudent during times of global and domestic economic uncertainty," said Kanika Pasricha, chief economic adviser, Union Bank of India.
"With the number higher versus budgeted ... the RBI has managed to provide fiscal leeway to the central government."
For fiscal 2025, the RBI's board has decided to raise the contingency risk buffer to 7.5% from 6.5% in the preceding year, it said.
The range of risk buffers was widened with the objective of providing adequate flexibility to the central bank, keeping in mind the prevailing macroeconomic and other factors, while also smoothening the transfer of surplus to the government, the RBI said in a release post an internal review of the framework.
"The review highlighted that the transfer of surplus to the government has not been as stable as was desirable," it said.
"Besides, certain risk sources that were not included in the current framework as they were not significant, have now gained in importance and merit inclusion," it added.
($1 = 85.3130 Indian rupees)
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