Record-breaking Dividend: RBI Declares an Unprecedented Surplus of Rs 2.69 Lakh Crore for Modi Government
RBI Announces Record Dividend Payout of Rs 2.69 Lakh Crore for FY 2024-25
The Reserve Bank of India (RBI) officially declared a dividend payout amounting to Rs 2.69 lakh crore to the central government for the fiscal year 2024-25. This marks the highest surplus ever transferred by the central bank, representing a 27% increase compared to the previous fiscal year (FY24).
The announcement was made during the 616th meeting of the RBI’s Central Board of Directors, chaired by Governor Sanjay Malhotra, held in Mumbai on Friday. During this session, the board assessed both global and domestic economic conditions and their inherent risks, ultimately deciding to transfer a surplus of Rs 2,68,590.07 crore to the government led by Prime Minister Narendra Modi.
This substantial financial boost is expected to support the government’s ambition to reduce the fiscal deficit to 4.4% in the current financial year. In addition, the Central Board resolved to raise the contingency risk buffer (CRB) from the prior 6.5% to 7.50%, taking into account the updated Economic Capital Framework (ECF) and the macroeconomic analysis conducted.
In FY24, the RBI had already set a precedent by transferring Rs 2.1 lakh crore, while the payout for the fiscal year 2022-23 was significantly lower at Rs 87,416 crore. Economists had projected that the surplus to the government could range between Rs 2.5 lakh crore and Rs 3.5 lakh crore for this fiscal period, attributing the central bank’s healthy profits to the depreciation of the rupee and earnings from government bonds, facilitated by adept liquidity management and interest rate strategies.
Each year, the RBI allocates a portion of its profits to the central government, generated from its investment income, fluctuations in the valuation of its foreign exchange reserves, and proceeds from currency printing fees.
Review of Economic Capital Framework
Last week, the RBI board conducted a review of the Economic Capital Framework (ECF), which establishes the guidelines on how much profit is retained versus how much is distributed. According to reports from government sources cited by PTI, the recommendations by the Bimal Jalan committee have proven to be resilient, with only minor adjustments anticipated over the next five years. The source indicated that in light of the current steady economic growth, revising the dividend transfer formula might be necessary to better define the expected structure for the subsequent five years. Thus far, the calculations for dividend transfers have adhered to the recommendations set forth by the Bimal Jalan panel regarding the ECF.
