RBI Approves Record ₹2.68 Lakh Cr Dividend Transfer

RBI Approves Record ₹2.68 Lakh Cr Dividend Transfer

Why in the News?

The RBI Board approved a record surplus transfer of ₹2.68 lakh crore to the Central Government for FY 2024-25. This decision, under the revised Economic Capital Framework, will support fiscal consolidation amid domestic and global economic uncertainties. The move comes as part of the latest dividends announcement in Reserve Bank of India news, highlighting the significance of the RBI dividend transfer to the nation’s economy.

Record Surplus Transfer Announced:

• The Reserve Bank of India (RBI), headquartered in Mumbai (where is RBI bank located), approved a ₹2.68 lakh crore dividend to the Central Government for FY 2024-25, also known as the accounting year 2024-25. This answers the question of what is the financial year of RBI.
• This is the highest-ever dividend transferred by the central bank, making it a significant piece of RBI news.
• The decision was made during a board meeting in Mumbai, chaired by RBI Governor Sanjay Malhotra, who is the current governor of Reserve Bank of India.
• It aims to strengthen government finances amidst fiscal challenges, as highlighted in recent RBI policy news.

Economic Capital Framework and CRB Update

• The surplus was calculated using the revised Economic Capital Framework and a specialized dividend calculator.
• This framework mandates maintaining a Contingent Risk Buffer (CRB), also known as the contingency risk buffer, between 5.5% and 7.5% of the RBI’s balance sheet. This is distinct from the CRB capital markets ltd share price, which is unrelated to the central bank’s operations.
• For FY 2024-25, the CRB was raised to the upper limit of 7.5%, allowing a higher dividend payout.
• The framework ensures financial resilience of the RBI while enabling fiscal space for the government.

Board Reviews and Economic Outlook

• The Central Board also reviewed domestic and global economic trends.
• It approved the RBI Annual Report and Financial Statements for the year, which will provide insights into the RBI balance sheet.
• The move comes at a time when the government seeks resources for capital expenditure, social spending, and economic recovery.
• The decision highlights RBI’s critical role in macro-economic stability and its impact on nominal GDP projections.

According to the latest RBI statement, this dividend transfer decision was based on a comprehensive macroeconomic assessment of the domestic economic landscape and global economic uncertainty. The central bank considered factors such as domestic bond holdings, potential fiscal shocks, fiscal revenues, liquidity management, government revenue, tax buoyancy, interest rate management, bond portfolio gains, and forex revaluation gains.

The RBI governor statement emphasized that this record dividend transfer would provide a significant fiscal boost to the government. It’s expected to help manage challenges arising from rupee depreciation and support initiatives like defence capex.

Experts suggest that this move, along with the RBI’s foreign exchange operations and potential open market operations, could have far-reaching implications for India’s economic trajectory in RBI 2023 and beyond. The substantial dividend, part of the upcoming dividends from various sources, is likely to bolster the government’s financial position and provide more room for economic maneuvers.

As we await more details in the upcoming RBI Annual Report, it’s clear that this record dividend transfer marks a significant milestone in the RBI’s financial history and its role in supporting India’s economic growth. This development also highlights the importance of RBI careers in shaping the nation’s financial landscape.