RBI To Transfer Rs 87,416 Crore Surplus To Government For FY23

This is the highest surplus transfer since Rs 99,122 crore in FY21 and higher than what the government had budged for.

<div class="paragraphs"><p>Reserve Bank Of India (Source: BQ Prime)</p></div>
Reserve Bank Of India (Source: BQ Prime)

The Reserve Bank of India said that its board on Friday approved to transfer a surplus of Rs 87,416 crore to the government for the financial year ended March 31.

This is the highest surplus transfer since Rs 99,122 crore in FY21. In financial year ended March 2022, the central bank had transferred Rs 30,307 crore.

The latest surplus transfer is higher than the Rs 48,000 crore that the government had budged as dividend income from the RBI and public sector banks.

Economists had estimated a surplus transfer of Rs 80,000-100,000 crore from the regulator.

The RBI board also decided to maintain the contingency risk buffer at 6%. In 2018-19, the RBI adopted the Economic Capital Framework requiring it to maintain a contingency risk buffer of 5.5-6.5% of its balance sheet.

It has raised the contingency risk buffer after at least two years, where it was maintained at 5.5%.

"The outperformance (in surplus transfer) is supported by large gross dollar sales of $206.4 billion in FYTD23 (till Feb 2023) v/s $96.7 billion in FY22. The revenues from dollar sales are likely to be substantial given that profits are calculated on the basis of historical cost of dollar purchase," said Gaura Sen Gupta, India economist at IDFC First Bank.

From a fiscal perspective the dividend represents additional revenue of 0.2% of gross domestic product. However, it may be too early to say with certainty that FY24 fiscal deficit will undershoot the 5.9% GDP target, Sen Gupta said.

Radhika Pandey of National Institute of Public Finance and Policy, the surplus transfer will aid the government meet its fiscal deficit target. It would crucial at a time when subsidy outgo will likely exceed the budget estimate.

"The dividend from RBI alone has come in significantly higher than budgeted while public sector banks are also declaring dividends which will add to the government’s coffers," said Teresa John, economist, Nirmal Bang Institutional Equities. "This in our view will aid government spending on rural and other schemes ahead of elections while maintaining capex spending without pressuring the fiscal deficit."

According to Madan Sabnavis of Bank of Baroda, the transfer is set to substantially help government finances and along with the performance of public sector banks and oil companies.

"The government is set for a bonanza on non tax receipts despite some scepticism around disinvestment proceeds," Sabnavis said.