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Bonanza for incoming govt as RBI to pay highest-ever dividend

Since the windfall will reflect in the current financial year (2024-25), it will provide the incoming government substantial headroom to ramp up spending on welfare and infrastructure schemes, while keeping the budget deficit in check.
Last Updated : 22 May 2024, 21:25 IST
Last Updated : 22 May 2024, 21:25 IST

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The Reserve Bank of India said on Wednesday that it will transfer Rs 2.11 lakh crore surplus or dividend to the Union government for the financial year ended March 31 (2023-24), the highest-ever dividend payout by the central bank, and a 141 per cent increase from the amount transferred in 2022-23.

This comes on the back of higher interest earned on foreign exchange reserves.

Since the windfall will reflect in the current financial year (2024-25), it will provide the incoming government substantial headroom to ramp up spending on welfare and infrastructure schemes, while keeping the budget deficit in check.

For perspective, the record dividend is 40 per cent higher than the total dividend of Rs 1.5 lakh crore that the Centre is expecting from the RBI, state-owned financial institutions and non-financial public sector companies combined, in 2024-25, according to the interim budget presented in February.

“Higher income for the RBI from both foreign and domestic assets contributed to the largest ever dividend payment from the central bank to the government. A large divided, as we had expected, provides a tailwind for government’s finances. We see the fiscal consolidation programme on track, and await the final budget in July,” said Shreya Sodhani, Regional Economist, Barclays.

In the interim budget, Finance Minister Nirmala Sitharaman had targeted a fiscal deficit of 5.1 per cent of nominal GDP.

With the bumper dividend, that target is likely to be squeezed further. Fiscal deficit is the difference between a government’s revenue and expenditure and is the most important indicator of an administration’s financial health.

The surplus transfer by the RBI to the Centre was Rs 87,416 crore for 2022-23. The previous high was Rs 1.76 lakh crore in 2018-19. 

“The higher-than-anticipated surplus can be attributed to higher interest income led by an increase in both global and domestic yields. There were also revaluation gains on forex reserves,” said economists at Bank of Baroda, adding that this gives the Centre headroom to either cut back on its gross borrowing from market or increase its thrust towards capital expenditure.

“The sharp jump in surplus amount could be attributed to higher income from forex holding of the central bank, among other factors,” said Soumya Kanti Ghosh, Chief Economic Advisor at SBI. The RBI closed March with around $646 billion in forex reserves, close to the record high of $648.56 billion touched in April.

At its board meeting on Wednesday, the central bank also reviewed the global and domestic economic scenario, including risks to the growth outlook.


“With the revival in economic growth in 2022-23, the CRB was increased to 6 per cent. As the economy remains robust and resilient, the Board has decided to increase the CRB to 6.50 per cent for 2023-24,” the RBI said. CRB, or Contingency Risk Buffer, is a specific provision fund kept by the central bank primarily to be used during any unexpected and unforeseen contingencies.


The dividend for 2023-24, the RBI said, has been arrived at on the basis of the Economic Capital Framework (ECF) adopted by it in August 2019, as per recommendations of the Bimal Jalan committee. The committee had recommended that the risk provisioning under the CRB be maintained within a range of 6.5-5.5 per cent of the RBI’s balance sheet.

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Published 22 May 2024, 13:00 IST

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