RBI approves record dividend payout of Rs 2.11 lakh crore to govt for FY24

RBI approves dividend of Rs 2.11 lakh crore to govt for FY24

The Reserve Bank of India (RBI) approved a dividend payout of approximately Rs 2.11 lakh crore for the central government in fiscal year 2024, representing a nearly 140% increase over the previous year.

In FY23, the RBI transferred Rs 87,416 crore to the Centre as a surplus.

The Central Board’s 608th Meeting, held in Mumbai, examined global and domestic economic issues, as well as potential dangers to the outlook.

The board ultimately decided to transfer a surplus of Rs 2,10,874 crore.

The RBI said, “During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the 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.”

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India’s GDP growth in FY23

However, as economic growth improved in FY23, the Contingency Risk Buffer (CRB) was raised to 6%. For FY24, it was raised to 6.5%, indicating the economy’s sustained strength and durability.

“As the economy remains strong and resilient, the Board has agreed to raise the CRB to 6.50 percent for fiscal year 2023-24. The Board then approved the transfer of Rs 2,10,874 crore as excess to the Central Government for accounting year 2023-24,” the RBI said.

Earlier sources stated that the RBI might authorize a dividend of more than Rs 1 lakh crore for the government in FY24.

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However, the total amount allowed is substantially larger than experts predicted. This excess transfer will not only boost the government’s coffers, but will also help it reach its budget deficit target.

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, said, “Higher interest rates both on domestic and foreign securities, significantly high gross sale of FX along with limited drag from liquidity operations compared to the previous year have probably led to such a whopping dividend.”

“Positively, this results in the contingency risk buffer remaining at the higher end of the statutory requirement. We predict such a windfall to reduce the fiscal deficit by 0.4% in FY25. The scope for lower borrowing revealed in the next Budget will now bring major relief to the bond markets,” Bhardwaj added.