The government is also likely to raise the target for surplus transfers from the Reserve Bank of India (RBI) and dividends from public sector banks and financial institutions in addition to increasing the target for dividend receipts. The Interim Budget had projected these surplus transfers at Rs 1.02 lakh crore. Analysts project that the surplus transfer from the RBI alone could exceed Rs 1 lakh crore, with the central bank expected to announce the surplus transfer to the government this month.
Last fiscal year, the RBI paid the government Rs 87,400 crore, and this year, the payout is speculated to potentially exceed Rs 1 lakh crore.
The RBI’s income
The RBI generates revenue from its assets and trading activities, which include both domestic assets (primarily Indian government bonds) and foreign assets (such as US, UK, and other foreign government bonds). Ownership of these bonds results in periodic interest receipts and valuation adjustments based on market prices. The past fiscal year was highly volatile, with bond prices falling due to rising yields and expectations of higher interest rates. Consequently, the RBI may have marked losses of an estimated 1.48 trillion rupees based on market movements in US bond yields, according to ICICI Securities Primary Dealership.
Despite the challenges, the RBI’s high foreign exchange reserves, which reached a record $637 billion, and its investments in US and other government bonds could result in significant interest earnings. These forex earnings from interest receipts could potentially cross Rs 2 lakh crore in FY24, compared to Rs 80,000 crore in FY23.
Estimates of the RBI’s dividend payout vary widely, with projections ranging from Rs 75-85,000 crore to Rs 0 billion to up to Rs 1.2 lakh crore after accounting for capital and contingency provisions.
As the fiscal year progresses, the amount of dividend the RBI will pay the government is being closely watched by officials and economists. Previously a routine matter, the central bank’s payout has gained significance in recent years amid debates over the fairness of the profits transferred to the government.
