RBI to transfer ₹99,122cr surplus to central govt

The Reserve Bank of India (RBI) has decided to transfer a surplus of ₹99,122 crore to the central government, the apex bank said on Friday. The decision to transfer the surplus was taken in the 589th meeting of the central board of directors of Reserve Bank of India held on Friday under the chairmanship of RBI governor Shaktikanta Das. The board reviewed the economic situation, global and domestic challenges and recent policy measures taken by the RBI to mitigate the adverse impact of the second wave of Covid-19 on the economy. With the change in the Reserve Bank’s accounting year to April-march (earlier July-june), the Board discussed the working of the RBI during the transition period of nine months (July 2020-March 2021). The board approved the transfer of ₹99,122 crore as surplus to the central government for the accounting period of nine months ended March 31, 2021 (July 2020-March 2021), while deciding to maintain the Contingency Risk Buffer at 5.5%.

The RBI will transfer ₹99,122 crore to government from its profit, helping Centre keep its fiscal deficit in check amid strained public finances because of the pandemic.

This amounts to 95% of the ₹1.04 lakh crore budgeted by the government as dividend from RBI and other stateowned banks and companies in the fiscal year. RBI had transferred ₹57,130 crore last year, but the numbers aren’t comparable because of a change in the accounting year.

“The (RBI) board approved the transfer of ₹99,122 crore as surplus to the central government for the accounting period of nine months ended 31 March 2021 (July 2020-March 2021), while deciding to maintain the contingency risk buffer at 5.5%,” it said.

RBI recently switched to an April-march fiscal from Julyto-june, and the payment this time around is for a ninemonth period. The central bank pays dividends to the government every year from the surplus it generates from market operations, investments and printing of currency.

In FY21, RBI conducted OMO of government securities to the tune of ₹5 lakh crore and OMO purchases of state development loans amounting to ₹30,000 crore. RBI’S dollar purchases during April-january totalled ₹5.60 lakh crore. RBI also conducted other liquidity operations, which would have all contributed to its earnings. With second wave of pandemic disrupting economic activity and possibly hurting tax revenue, the Centre will still need to achieve the ₹1.75 lakh crore in divestment target for this fiscal to keep the budget deficit close to this year’s targeted 6.8% of gross domestic product.

“While we await the detailed document to gauge the sources of higher RBI income and, thus, transfers, it could be possible that the high dividend may have emerged owing to RBI’S forex operations, wherein even though it was a net forex buyer in FY21, the gross dollar sale was close to $85.2 billion for the relevant period of July 2020 to March 2021 (versus barely $20 billion in the same period the previous year) and could have realised decent profits on forex sales. Separately, it also needs to be seen if they used the revaluation reserves in order to pay a higher dividend, though it looks unlikely,” said Madhavi Arora, an economist at brokerage Emkay Global.