RBI board approves record surplus transfer of Rs 2.11 lakh crore to government for FY24

The dividend transferred in 2024-25 is substantially higher than what the government had anticipated, providing a significant fiscal boost. The Reserve Bank of India's (RBI) Central Board of Directors has approved an unprecedented transfer of Rs 2.11 lakh crores as surplus to the government for the financial year 2023-24, the highest ever yearly surplus transfer by the Indian central bank. This announcement was made on May 22.

The surplus transfer, derived from the Economic Capital Framework (ECF) adopted by the RBI on August 26, 2019, following the recommendations of the Bimal Jalan committee, is notably higher due to increased income from the RBI’s forex holdings, among other factors. Although the surplus pertains to the fiscal year 2023-24, it will be reflected in the government’s accounts for FY25. This unexpected windfall is poised to enhance the central government’s liquidity position and subsequently support its expenditure plans, according to experts.

Additionally, the RBI announced an increase in the Contingent Risk Buffer (CRB) to 6.50 percent for the fiscal year 2023-24. This adjustment follows the gradual economic recovery post-COVID-19, with the CRB previously held at 5.50 percent during 2018-19 to 2021-22 to foster growth amidst challenging macroeconomic conditions. With the economy showing robust growth in FY 2022-23, the CRB was raised to 6.00 percent and further to 6.50 percent for FY 2023-24.

The government had initially budgeted a dividend of Rs 1.02 lakh crore for 2024-25, which is 2.3 percent lower than the revised estimate of Rs 1.04 lakh crore for 2023-24. The RBI's actual transfer far exceeded the anticipated Rs 85,000 crore to Rs 1 lakh crore, reflecting stronger than expected interest income from foreign securities. This approval came during the 608th meeting of the RBI's Central Board of Directors, attended by key officials including Deputy Governors Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar, Swaminathan J., and other notable directors and secretaries.

This significant surplus transfer underscores the resilience and robust performance of the Indian economy and the effective management of the country’s financial assets by the RBI.