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Mint
26-05-2025
- Business
- Mint
RBI's ₹2.7 trillion: Many benefits arise from one big beautiful surplus
On Friday last, the Reserve Bank of India (RBI) announced its decision to transfer a record surplus of nearly ₹2.7 trillion for 2024-25 to the Indian government's coffers. The sum of ₹2,68,590.07 crore transferred is loosely referred to as the central bank's 'annual dividend,' but since it is not a commerce entity, this is actually the 'surplus' of its income over expenditure. It is 27% higher than the previous year's figure, despite an enlarged contingency risk buffer (CRB), as stipulated by the revised Economic Capital Framework (ECF) approved by RBI's Central Board. As against a CRB of 5.5-6.5% laid down by a panel led by former governor Bimal Jalan half a decade ago, the range has been widened to 4.5-7.5% of RBI's balance sheet. Rightly so. Also Read: Ajit Ranade: RBI's increasing fiscal support deserves a closer look That RBI was in the process of reviewing the ECF was known, but few may have expected the upper end to be raised. The CRB comprises three sub-buffers; while the norms were kept steady for credit risk and operational risk, the central bank's buffer for monetary and financial risk was reset at 3.5-6.5% from 4.5%-5.5% earlier. This is entirely in keeping with the principles of prudent central banking. The CRB, as the name suggests, is meant to take care of contingencies. So, from 2018-19 to 2021-22, a period that included an economic slowdown even before the pandemic disruption, RBI maintained its CRB at the 5.5% lower bound as part of its effort to support India's economy. It was upped to 6% for 2022-23 and further to 6.5% for 2023-24. And now, based on its assessment of 'macroeconomic conditions and other factors affecting the balance sheet of RBI," it has been raised to 7.5% for 2024-25. Also Read: Dividend from public sector cos may swell govt coffers by over ₹80,000 cr in FY26, all-time high A detailed analysis of RBI's income, expenditure and sources of surplus will have to await publication of its Annual Report for 2024-25. But it is fair to surmise that, as in the past, the bulk of its earnings last year came from its foreign exchange transactions in support of the rupee. The balance is likely to be from earnings on its holdings of foreign and domestic securities; in the latter case, as a result of open market operations to infuse liquidity into the banking system, which RBI did by buying bonds in cash from banks. The sale of dollars to prop the rupee's rate of exchange turned a 'profit' for it since the dollars sold during the year were acquired earlier at a much lower price. Some back-of-the-envelope math suggests that every dollar sold may have fetched RBI close to ₹6. Given the enlarged scale of its forex operations last fiscal year, its gains would have been substantial. Also Read: Mint Explainer: How RBI's new digital lending rules will impact lenders and borrowers But there is a flip side to this. Given that RBI payouts of such magnitude typically spring from heavy intervention on the rupee's behalf, there's a risk that the other side of the trade-off could get short shrift; a rupee that's too strong dulls the pricing edge of our exports, as the landed prices of Indian goods and services are higher overseas than they'd otherwise be. How best to manage the rupee, though, is a complex question involving various macro variables, so this debate is unlikely to be settled easily. What's doubtless is that the surplus transfer could help the Centre keep its fiscal deficit for 2025-26 within its 4.4%-of-GDP target in an economic scenario where slower growth could hurt its revenues. Both Mint Street and North Block have reason to be pleased with this mega surplus. With multiple benefits arising from it, it's good for the Indian economy.
Times of Oman
24-05-2025
- Business
- Times of Oman
RBI board approves record surplus transfer of Rs 2.69 lakh crore to Centre
Mumbai: The Reserve Bank of India's (RBI's) central board has approved a record Rs 2.69 lakh crore surplus transfer to the central government for the fiscal year 2024-25. A decision in this regard was taken in the 616th Meeting of the Central Board of the Reserve Bank of India on Friday. This is the highest-ever surplus transfer by the RBI to the government for fiscal 2024-25 (FY25). The RBI in the financial year ending March 2024 transferred Rs 2.1 lakh crore to the centre. The RBI said in a statement, "The Board thereafter approved the transfer of Rs 2,68,590.07 crore as surplus to the Central Government for the accounting year 2024-25." During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the Covid-19 pandemic, the Central 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. The CRB was increased to 6.00 per cent for FY 2022-23 and to 6.50 per cent for FY 2023-24. "Based on the revised ECF and taking into consideration the macroeconomic assessment, the Central Board decided to further increase the CRB to 7.50 per cent," the RBI statement added. In its statement, the RBI added that the Central Board at the 616th Meeting reviewed the global and domestic economic scenario, including risks to the outlook. The Board also discussed the working of the Reserve Bank during the year April 2024 - March 2025 and approved the Reserve Bank's Annual Report and Financial Statements for the year 2024-25. Commenting on the announcement, Gaura Sengupta, Chief Economist at IDFC FIRST Bank, said, "The RBI dividend was in line with our expectations at Rs 2.7 tn vs. last year's dividend of Rs 2.1 tn (IDFC First Bank estimate of INR 2.6 tn to Rs 3tn)." "In the FY26 Union Budget, dividends from RBI and PSUs are budgeted at INR 2.6 tn, which implies an RBI dividend of ~INR 2.3 tn. While details have not yet been released, income has likely been supported by earnings on foreign exchange transactions," Sengupta said.
India Gazette
23-05-2025
- Business
- India Gazette
RBI board approves record surplus transfer of Rs 2.69 lakh crore to Centre
Mumbai (Maharashtra) [India], May 23 (ANI): The Reserve Bank of India's (RBI's) central board has approved a record Rs 2.69 lakh crore surplus transfer to the central government for the fiscal year 2024-25. A decision in this regard was taken in the 616th Meeting of the Central Board of the Reserve Bank of India on Friday. This is the highest-ever surplus transfer by the RBI to the government for fiscal 2024-25 (FY25). The RBI in the financial year ending March 2024 transferred Rs 2.1 lakh crore to the centre. The RBI said in a statement, 'The Board thereafter approved the transfer of Rs 2,68,590.07 crore as surplus to the Central Government for the accounting year 2024-25.' During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the Covid-19 pandemic, the Central 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. The CRB was increased to 6.00 per cent for FY 2022-23 and to 6.50 per cent for FY 2023-24. 'Based on the revised ECF and taking into consideration the macroeconomic assessment, the Central Board decided to further increase the CRB to 7.50 per cent,' the RBI statement added. In its statement, the RBI added that the Central Board at the 616th Meeting reviewed the global and domestic economic scenario, including risks to the outlook. The Board also discussed the working of the Reserve Bank during the year April 2024 - March 2025 and approved the Reserve Bank's Annual Report and Financial Statements for the year 2024-25. Commenting on the announcement, Gaura Sengupta, Chief Economist at IDFC FIRST Bank, said, 'The RBI dividend was in line with our expectations at Rs 2.7 tn vs. last year's dividend of Rs 2.1 tn (IDFC First Bank estimate of INR 2.6 tn to Rs 3tn).' 'In the FY26 Union Budget, dividends from RBI and PSUs are budgeted at INR 2.6 tn, which implies an RBI dividend of ~INR 2.3 tn. While details have not yet been released, income has likely been supported by earnings on foreign exchange transactions,' Sengupta said. (ANI)
Business Standard
23-05-2025
- Business
- Business Standard
RBI approves transfer of Rs 2.69 lakh crore as surplus to Central Government
The 616th meeting of the Central Board of Directors of Reserve Bank of India was held today at Mumbai under the Chairmanship of Sanjay Malhotra, Governor of the central bank. The Board reviewed the global and domestic economic scenario, including risks to the outlook. The Board also discussed the working of the Reserve Bank during the year April 2024 - March 2025 and approved the Reserve Bank's Annual Report and Financial Statements for the year 2024-25. The transferable surplus for the year (2024-25) has been arrived at on the basis of the revised Economic Capital Framework (ECF) as approved by the Central Board in its meeting held on May 15, 2025. The revised framework stipulates that the risk provisioning under the Contingent Risk Buffer (CRB) be maintained within a range of 7.50 to 4.50 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. The CRB was increased to 6.00 per cent for FY 2022-23 and to 6.50 per cent for FY 2023-24. Based on the revised ECF, and taking into consideration the macroeconomic assessment, the Central Board decided to further increase the CRB to 7.50 percent. The Board thereafter approved the transfer of ₹2,68,590.07 crore as surplus to the Central Government for the accounting year 2024-25.
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Business Standard
23-05-2025
- Business
- Business Standard
RBI's board approves record ₹2.69 trillion surplus transfer to govt
The Reserve Bank of India's (RBI 's) central board, which met today, has approved a record ₹2.69 trillion surplus transfer to the government for the financial year 2024–25, while expanding the range of the Contingent Risk Buffer (CRB) from 7.5 per cent to 4.5 per cent of the central bank's balance sheet. 'Based on the revised Economic Capital Framework, and taking into consideration the macroeconomic assessment, the Central Board decided to further increase the CRB to 7.50 per cent,' the RBI said in a statement. In the last financial year, the RBI had transferred ₹2.11 trillion to the government. The CRB had previously been increased to 6.00 per cent for FY 2022–23 and to 6.50 per cent for FY 2023–24. It was decided to retain the broad principles of the framework, with no major changes in the risk assessment methodologies. 'Certain changes have, however, been made with the objective of further strengthening the framework to align better with any emerging risks to the balance sheet of the RBI,' the statement said. With respect to the Surplus Distribution Policy, any available equity in excess of 7.5 per cent of the balance sheet size (after considering shortfall in market risk buffers, if any) may be written back from the Contingency Fund to income. 'In case the available equity is below the lower bound of its requirement, no surplus will be transferred to the government till at least the minimum level of Required Realised Equity is achieved,' the RBI added. The transferable surplus for any year is determined based on the Economic Capital Framework (ECF) adopted by the central bank in 2019, for finalising the accounts for 2018–19, in accordance with the recommendations of the Expert Committee to review the extant Economic Capital Framework of the Reserve Bank of India, chaired by Bimal Jalan.
