RBI Approves Dividend Transfer Of Rs 87,416 Crore To Government For FY23

The Reserve Bank of India's (RBI) board approved a surplus transfer to the government on Friday totaling 874.16 billion rupees ($10.69 billion), which was less than the market expectation of at least 1 trillion rupees.

The central bank and state-run banks were expected to pay the government a dividend of 480 billion rupees for the fiscal year 2023. In fiscal 2022, the RBI gave the government a transfer of 303.07 billion rupees.

Analysts had anticipated a significant surplus transfer that would surpass the budget estimates, primarily driven by the profit generated by the Reserve Bank of India (RBI) from substantial dollar sales. Additionally, the higher interest income from treasury holdings both domestically and internationally was also expected to contribute to the surplus transfer, as Reuters reported.

The RBI board also resolved to increase the Contingency Risk Buffer from its previous level of 5.50% to 6%..

"RBI has approved Rs 87,416 crore as a dividend payment to the government for 2022-23. The figure is in line with our estimate. We were expecting anything between Rs 80,000 cr to Rs 95,000 cr. The fact that they have increased the contingency buffer as a percentage of a balance sheet from a 5.5-6% probably has led to it remaining at the lower band of our expectation. Otherwise, it would have touched Rs 95,000 cr or even more. Nonetheless, we believe the RBI has made bumper profits on Fx sales. This has also been countered by the fact that they would have made considerable losses on their MTM books and foreign securities for which they would have to do much higher provisioning from their profits and thus, their gains are lower than Rs 1 Lakh crore." Ms. Madhavi Arora, Lead Economist, Emkay Global Financial Services said on the decision of RBI announcing dividend for FY22-23.

According to a statement from the RBI, the Board also discussed the status of the local and global economies, as well as the difficulties they face, especially the implications of recent developments in global geopolitics.