Budget 2023: Govt pegs FY24 dividend from RBI, PSU banks at Rs 48,000 crore

The huge downward revision in the revised estimate follows the RBI's transfer of a dividend of only Rs 30,307 crore in May 2022.

This was due to a provision of Rs 1.15 lakh crore it made towards its Contingency Fund – more than five times what it had provided the previous year – on account of the hit its investments in foreign securities took because of higher interest rates globally.

The RBI's Contingency Fund is meant for meeting unexpected and unforeseen contingencies, including depreciation in the value of securities, risks arising out of monetary and exchange rate policy operations, and systemic risks.

In the course of performing its duties, the RBI generates revenue. After meeting its expenses, providing for any losses on its investments, and maintaining enough capital, the central bank must transfer any remaining profits to the central government in the next financial year as a dividend.

As such, the Rs 48,000 crore budget estimate as RBI dividend for 2023-24 will be from the RBI's operations for 2022-23 – a year in which the central bank has sold huge amounts of foreign currency to stabilise the rupee's exchange rate following a rapid increase in global interest rates.

While the former will boost the RBI's kitty in the form of foreign exchange gains, a rise in global interest rates will force it to make large provisions as the value of its foreign investments – such as holdings of US government bonds – would have taken a hit.

The RBI will likely transfer the dividend to the Centre in May after its accounts for 2022-23 are finalised.

Over the years, the central bank's dividend has become a key source of revenue for the government, with a change in its economic capital framework in August 2019 resulting in even larger sums being transferred to the government.

The rise in the dividend followed the RBI's acceptance of the recommendations of the Bimal Jalan-led expert committee.