Latest news with #CRB
Economic Times
3 days ago
- Business
- Economic Times
Interest rates, dollar sales boost RBI income by 27%
RBI's FY25 net income surged by 27% due to higher global interest rates and dollar sales, enabling a record surplus transfer to the government. Increased returns from foreign currency assets and forex transactions significantly contributed to this rise. The central bank also strategically increased its gold holdings to bolster its asset mix and manage risks. Tired of too many ads? Remove Ads Income from Forex Transactions Up 33% Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Price Stability, Liquidity A surge in global interest rates and gains from dollar sales to stem the rupee's fall boosted the Reserve Bank of India's (RBI's) FY25 net income by 27%, enabling it to transfer a record surplus to the central government and help bridge the fiscal gap. North Block's money manager also demonstrated the prudence it expects from mainstream lenders, boosting gold holdings in its overall asset mix to mitigate quality slippage central bank's net income rose to ₹2.69 lakh crore last fiscal, up from ₹2.11 lakh crore a year earlier, as its investments in overseas assets yielded decade-high returns, its annual report shows.'Income from foreign sources increased 38% to ₹2.58 lakh crore,'' the annual report said. 'The rate of earnings on foreign currency assets was 5.31% during the year compared with 4.21%'' in the year before that.A sharp increase in the returns from foreign currency assets (FCA) of the central bank helped it last week pay a dividend of ₹2.69 lakh crore to the government, up from ₹2.1 lakh crore a year ago, giving the Centre a fiscal space of 0.12% of payout was higher despite an increase in the contingency risk buffer (CRB) to a maximum 7.5% of the RBI's balance sheet under a revised economic capital framework (ECF).'Earnings on FCA improved significantly on account of better returns on the dollar,'' said Dipanwita Mazumdar, economist at Bank of Baroda . 'This becomes critical given that our forex reserves held by the RBI have been increasing and are being invested in various avenues.''Interest income from investments in foreign securities was up 48% to ₹97,007 crore against ₹65,328 crore in FY24. The report also says that RBI's income from foreign exchange transactions rose 33% to ₹1.11 lakh crore in FY25, against ₹83,616 crore a year ago.'This ensures that the Centre meets its fiscal deficit target of 4.4% of GDP—if not exceed,' said Gaura Sengupta, chief economist, IDFC FY19, the RBI adopted the ECF that required the central bank to maintain a contingency risk buffer of 5.5–6.5%.'The dividend would have been even higher if the provisioning wasn't increased to 7.5% of total assets from 6.5% earlier,' said Sengupta. 'Indeed, if the provisioning was maintained according to the old framework, the dividend would have been ₹3.5 lakh crore.'Under the revised ECF, the CRB is 4.5–7.5% of the central bank's balance sheet.'The dividend announcement, though lower than market expectation, was still larger than the budgeted estimate by 0.15% of GDP,'' said Anubhuti Sahay, Head of India Economics Research, Standard Chartered forward, domestic economic activity is expected to strengthen from the lows of the first half of FY25, said the annual report. The economic outlook is an important deciding factor in arriving at the CRB inflation is expected to ease and move further toward the legally mandated target in 2025–26, said the annual report. Monetary policy is committed toward achieving durable price stability, which is a necessary prerequisite for high growth on a sustained basis, said the Reserve Bank will undertake liquidity management operations in sync with the monetary policy stance and keep system liquidity adequate to meet the needs of the productive sectors of the economy, said the annual FY25, the RBI's total expenditure rose 7.76% to ₹69,714 crore, due to higher interest spends, printing of notes and employee expenditure also includes provisions toward the contingency fund and asset development fund (ADF). However, no provision was made toward amount of ₹44,861.70 crore was provided toward the contingency fund to maintain the Available Realised Equity at the level of 7.5% of the balance sheet. Accordingly, the balance in CF as on March 31, 2025, was ₹5.42 lakh crore, compared with ₹4.29 lakh crore as on March 31, size of the balance sheet increased by ₹5.78 lakh crore, or 8.2%, to ₹76.25 lakh crore. The increase on the assets side was due to a rise in gold holdings, domestic investments and foreign investments by 52%, 14.3% and 1.7%, the liabilities side, expansion was due to an increase in notes issued, revaluation accounts, and other liabilities by 6.03%, 17.32% and 23.31%, assets constituted 25.73% while foreign currency assets, gold (including gold deposit and gold held in India) and loans and advances to financial institutions outside India constituted 74.27% of total assets as on March 31, 2025, against 23.31% and 76.69%, respectively, as on March 31, share of gold in net foreign assets increased to 12% as at end-March 2025 from 8.3% as at end-March 2024, mainly due to revaluation gains from gold credit to the government expanded during the year owing to the liquidity injection through purchase of G-secs via open market operations during January–March 2025.
&w=3840&q=100)
Business Standard
7 days ago
- Business
- Business Standard
Widening of CRB range aimed at smoothening surplus transfer to govt
The revised Economic Capital Framework (ECF) adopted by the Reserve Bank of India (RBI), which expanded the Contingency Risk Buffer (CRB) range to 4.5–7.5 per cent, is intended to give the central bank greater flexibility to smoothen surplus transfers to the government without significantly impacting fiscal calculations, experts said. Last week, the RBI's central board approved a record ₹2.69 trillion surplus transfer to the government for the financial year 2024–25, while maintaining the CRB at 7.5 per cent—the upper end of the newly revised range. The robust surplus was supported by higher earnings from foreign exchange transactions (gross dollar sales surged to $399 billion in FY25 from $153 billion in FY24), increased interest income from government securities, and lower provisioning for revaluation losses amid possible mark-to-market gains on both foreign and domestic assets. Previously, the CRB range was narrower—between 5.5 and 6.5 per cent. From FY19 to FY22, RBI kept the CRB at 5.5 per cent of its balance sheet. It was increased to 6 per cent in FY23 and further to 6.5 per cent in FY24. 'Increasing the Contingency Risk Buffer (CRB) provides the RBI with greater flexibility, enabling it to smoothen surplus transfers to the government and prevent significant volatility in fiscal calculations,' said Gaura Sen Gupta, Chief Economist, IDFC First Bank. 'In an exceptional year like FY25, the RBI may opt to raise the CRB to 7.5 per cent, thereby transferring a lower surplus. Conversely, during a challenging year, it could reduce the CRB to 4.5 per cent to maintain a reasonably stable surplus transfer,' she said. Gupta added that the move is prudent, particularly in the current volatile global environment, as a large portion of the RBI's foreign currency assets are invested in overseas securities—primarily US Treasuries. The RBI's central board adopted the revised ECF based on the recommendations of a committee chaired by Bimal Jalan. The expert committee had suggested that the ECF be reviewed every five years. Following this review, the board concluded that the existing ECF had successfully ensured a resilient balance sheet and healthy surplus transfers to the government. However, certain adjustments were made to strengthen the framework in light of emerging risks. 'The revised ECF provides requisite flexibility year-on-year to the central board in the maintenance of risk buffers, considering prevailing macroeconomic and other factors, while also ensuring the needed intertemporal smoothening of the surplus transfer to the government,' the RBI said. According to a Barclays report, the revision addresses the uneven nature of past transfers: ₹2.1 trillion was transferred in FY24—the highest ever—more than double the ₹0.9 trillion transferred in FY23. In comparison, FY22 saw a much lower transfer of ₹0.3 trillion, the smallest in over a decade. 'The reason they have widened it is to provide flexibility in uncertain environments,' said Indranil Pan, Chief Economist, Yes Bank. 'If, in the future, they feel the risk buffer is no longer needed to the same extent, they can reduce it.'
Economic Times
24-05-2025
- Business
- Economic Times
RBI's Rs 2.68 lakh crore dividend bonanza beats govt estimate
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel Mumbai: The central bank Friday declared a record surplus transfer of Rs 2.68 lakh crore for FY25 to the Centre--exceeding North Block's budget estimates of dividend receipts for this fiscal and beating the FY24 payout by nearly a third--and reworked the balance sheet-referenced distribution formula to make future payments more economic capital framework (ECF), which is the theoretical bedrock determining the payout range for a financial year, has been tweaked so as to ringfence the Reserve Bank of India 's ( RBI ) finances in times of financial Friday, the RBI Board raised the upper band of the Contingent Risk Buffer (CRB), now to be maintained within a significantly wider range of 7.5% to 4.5% of the central bank's balance band previously ranged from 6.5% to 5.5%.'This revised CRB range gives the RBI more room for future dividends,'' said Abhishek Upadhyay, senior economist, ICICI Securities Primary Dealership. 'With this payout, it is possible for the fiscal deficit to be lower by 10-20 basis points.'One basis point is 0.01 percentage dividend transfer to the government, based on the Bimal Jalan committee recommendations, has 'stood the test of time', and only some tweaking was required for the coming five years, said people familiar with the said at a time when the economy is seeing a steady, consistent growth rate, some alteration in dividend transfer formula may be required to suggest what the math should be for the next five years."The Bimal Jalan panel recommendations have stood the test of time, even during Covid... I don't see the panel formulations coming to such an end. Some kind of alterations will happen and RBI is working on it, maybe some tweaking (of the panel recommendations)...," said one of the ECF was adopted in August 2019 based on the Jalan-led Expert Committee announced fund transfer of Rs 2.68 lakh crore is 27% higher than the Rs 2.1 lakh crore paid to the government by its money manager last year. The budget, in February, had estimated receipts of Rs 2.56 lakh crore as dividend income from the RBI and other government financial the CRB was retained at 6.5%, as in the previous year, the surplus fund transfer could be Rs 3.5 lakh RBI's surplus transfer has become a key component in the government's management of fiscal balance. As the central bank's balance sheet and operations have been expanding, the transfers have also been increasing. Worried about a likely deterioration of the central bank's finances, a committee under former Governor Bimal Jalan was set up to prescribe a framework that was reviewed internally by the RBI recently. It has suggested new norms, including the widening of the contingency reserve buffer.'The extant ECF had met its objective of ensuring a resilient balance sheet for RBI, while maintaining a healthy transfer of surplus to the government,'' the RBI said in a statement Friday. 'Certain changes have, however, been made with the objective of further strengthening the framework to align better with any emerging risks.'The central bank said the changes to the framework Friday allow better risk management, especially in an uncertain trade environment globally.'The revised ECF provides requisite flexibility in the maintenance of risk buffers, considering the prevailing macroeconomic and other factors, while also ensuring needed intertemporal smoothing of the surplus transfer to the government,'' the RBI revised framework using a much wider reference frame allows flexibility and is more practical, experts said.'The decision to widen the Contingency Risk Buffer band to 4.5-7.5% of the balance sheet from 5.5-6.5% previously is pragmatic,'' said Anubhuti Sahay, head of India economic research, Standard Chartered Bank. 'It provides the RBI with the required flexibility to manage potential volatility in income generation and the objective of financial stability and allows for better predictability on dividend transfer to the government and thus fiscal deficit planning.'The Jalan committee recommended a capital framework that served well for the RBI as well as the government as it ended a controversy over how much surplus the central bank could keep with itself. Former Chief Economic Advisor Arvind Subramaniam first raised the issue years ago when the government was facing a tough fiscal situation that led to disputes with the revised framework also includes factoring in the market risks associated with the off-balance items of the central bank into the capital framework, it of the central bank also do not remain the same as its positions in the market determine whether its trades in the money and forex markets turn profitable. After Covid, many central banks have slipped into losses, and some of them have skipped transferring any surplus to their governments because of lack of any gains.'The same kind of revenue may not always be expected in the future and hence cannot be called a new normal as forex sales may not be as large as this year,'' said Madan Sabnavis, economist, Bank of Baroda. 'But, on the other hand, if buffers are lowered when conditions are normal, then there could be earnings from this side.'Under the new framework, the central bank could transfer all of the realised equity above the 7.5% contingency buffer, while not transferring any when it falls below the lower respect to the Surplus Distribution Policy, any available equity in excess of 7.5% of the balance sheet (after considering shortfall in market risk buffers, if any) may be written back from the Contingency Fund to income, the RBI said.'In case the available equity is below the lower bound of its requirement, no surplus will be transferred to the government until at least the minimum level of Required Realised Equity is achieved,'' the RBI said.
Time of India
24-05-2025
- Business
- Time of India
RBI declares 27% higher dividend on higher capital provision
The RBI has declared a record surplus transfer of Rs 2.68 lakh crore to the Centre for FY25, exceeding budget estimates. The economic capital framework has been tweaked, widening the Contingent Risk Buffer range to 4.5-7.5% of the balance sheet. This revision allows for better risk management and more predictable dividend transfers to the government. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The central bank Friday declared a record surplus transfer of Rs 2.68 lakh crore for FY25 to the Centre – exceeding North Block's budget estimates of dividend receipts for this fiscal and beating the FY24 payout by nearly a third - and reworked the balance sheet-referenced distribution formula to make future payments more economic capital framework (ECF), which is the theoretical bedrock determining the payout range for a financial year, has been tweaked so as to ringfence the Reserve Bank of India 's ( RBI ) finances in times of financial Friday, the RBI Board raised the upper band of the Contingent Risk Buffer (CRB), now to be maintained within a significantly wider range of 7.50 to 4.50 per cent of the central bank's balance sheet. The band previously ranged from 6.5 percent to 5.5 percent.'This revised CRB range gives the RBI more room for future dividends,'' said Abhishek Upadhyay, senior economist, ICICI Securities Primary Dealership. ``With this payout, it is possible for the fiscal deficit to be lower by 10-20 basis points.'One basis point is 0.01 percentage dividend transfer to the government, based on the Bimal Jalan committee recommendations, has "stood the test of time," and only some tweaking was required for the coming five years, a government official announced fund transfer of Rs 2.68 lakh crore is 27% higher than the Rs 2.1 lakh crore paid to the government by its money manager last year. The budget, in February, had estimated receipts of Rs 2.56 lakh crore as dividend income from the RBI and other financial institutions North Block the CRB was retained at 6.5%, as in the previous year, the surplus fund transfer could be Rs 3.5 lakh RBI's surplus transfer has become a key component in the government's management of fiscal balance. As the central bank's balance sheet and operations have been expanding, the transfers have also been increasing. Worried about a likely deterioration of the central bank's finances, a committee under former Governor Bimal Jalan was set up to prescribe a was reviewed internally by the RBI recently and that has suggested new norms, including the widening of the contingency reserve buffer."The extant ECF had met its objective of ensuring a resilient balance sheet for RBI, while maintaining a healthy transfer of surplus to the Government,'' the RBI said in a statement Friday. ``Certain changes have, however, been made with the objective of further strengthening the framework to align better with any emerging risks.'The central bank said the changes to the framework Friday allows better risk management, especially in an uncertain trade environment globally.'The revised ECF provides requisite flexibility in the maintenance of risk buffers, considering the prevailing macroeconomic and other factors, while also ensuring needed intertemporal smoothing of the surplus transfer to the government,'' the RBI revised framework using a much wider reference frame allows flexibility and is more practical, experts said.'The decision to widen the Contingency Risk Buffer band to 4.5-7.5% of the balance sheet from 5.5-6.5% previously is pragmatic,'' said Anubhuti Sahay, head of India economic research, Standard Chartered Bank. ``It provides the RBI with the required flexibility to manage potential volatility in income generation and the objective of financial stability and allows for better predictability on dividend transfer to the government and thus fiscal deficit planning.'The Jalan committee recommended a capital framework that served well for the RBI as well as the government as it ended a controversy over how much surplus the central bank could keep with itself. Former Chief Economic Advisor Arvind Subramaniam first raised the issue years ago when the government was facing a tough fiscal situation that led to disputes with the revised framework also includes factoring in the market risks associated with the off-balance items of the central bank into the capital framework, it of the central bank also do not remain the same as its positions in the market determine whether its trades in the money and forex markets turn profitable. After Covid, many central banks have slipped into losses, and some of them have skipped transferring any surplus to their governments because of lack of any gains.'The same kind of revenue may not always be expected in the future and hence cannot be called a new normal as forex sales may not be as large as this year,'' said Madan Sabnavis, economist, Bank of Baroda . ``But, on the other hand, if buffers are lowered when conditions are normal, then there could be earnings from this side.'Under the new framework, the central bank could transfer all of the realised equity above the 7.5 percent contingency buffer, while not transferring any when it falls below the lower respect to the Surplus Distribution Policy, any available equity in excess of 7.5% of the balance sheet (after considering shortfall in market risk buffers, if any) may be written back from the Contingency Fund to income, the RBI said."In case the available equity is below the lower bound of its requirement, no surplus will be transferred to the government until at least the minimum level of Required Realised Equity is achieved,'' the RBI said.
Time of India
24-05-2025
- Business
- Time of India
RBI's record Rs 2.7 trillion dividend fueled by US dollar sell offs and forex gains: SBI
The Reserve Bank of India's historic dividend payout of approximately Rs 2.7 trillion to the government was fueled by strong sales of US dollar, a high foreign exchange gain and steady rise in interest income, State Bank of India said in its latest report. The report said that RBI's active participation in the forex market was a major contributor to this huge surplus. In fact, the central bank emerged as the biggest seller of foreign exchange reserves among Asian peers in January 2025. 'This surplus payout is driven by robust gross dollar sales, higher foreign exchange gains, and steady increases in interest income,' the report noted, quoted by ANI. Over the past year, the apex bank adopted a series of aggressive measures, including large scale sell offs of US dollars, as a part of its intervention strategy to stabilise Rupee. India's forex reserves had peaked at $704 billion in September 2024. After this, the RBI began offloading large amounts of dollars to prevent excessive volatility in the currency markets. The gross dollar sales reached a whopping $371.6 billion by February 2025, amounting well over double the $153 billion recorded during FY24. These drastic interventions helped the central bank book in substantial forex gains, contributing significantly to the dividend payout. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like サントリーロコモアが５,９４０→１,０８０円で試せる ロコモア こちらをクリック Undo Alongside foreign exchange gains, the RBI also saw increased earnings from its holdings in rupee securities, which rose by Rs 1.95 lakh crore to Rs 15.6 lakh crore as of March 2025. While falling government securities (G-sec) yields dampened mark-to-market (MTM) gains, overall interest income still recorded a healthy growth. The SBI report praised the central bank's prudent approach to maintaining financial stability. It further added that the surplus transfer could have soared even higher, possibly crossing Rs 3.5 trillion, had the central bank not decided to raise its risk buffer. The Contingent Risk Buffer (CRB), a safety net for unforeseen shocks, was kept within the 5.5 to 6.5 per cent range of the RBI's balance sheet in line with recommendations from the central board. The surplus was calculated under the revised Economic Capital Framework (ECF) and approved by the RBI's Central Board during a meeting held on 15 May 2025. This unexpected windfall comes as a major boost to the government's finances. The Union Budget for 2025–26 had projected a total dividend income of Rs 2.56 lakh crore from the RBI and state-run financial institutions. With the latest payout, the actual figure will now comfortably exceed budget estimates. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
