RBI board approves transfer of Rs 30,307 crore as dividend to government for this fiscal

The Reserve Bank of India's (RBI) Central Board of Directors have approved the transfer of Rs 30,307 crore as surplus to the Centre for FY22.

The board also decided to maintain the Contingency Risk Buffer at 5.50 percent.

The dividend for FY22, transferred in FY23, is sharply lower than what the government had expected to receive. In the 2022 Budget, the government had estimated it would get Rs 73,948 crore as dividend from the central bank and state-run lenders in FY23.

At Rs 73,948 crore, the budgeted dividend revenue from the central bank and PSU banks was 27 percent lower than the Rs 1.01 lakh crore the Centre received in FY22. Of this sum, the RBI had contributed a massive Rs 99,122 crore.

The Rs 30,307 crore transferred as surplus is for a full 12-month financial year. In 2020, the RBI had moved from a July-June accounting year to April-March to align its financial year with that of the government. As such, July 2020 to March 2021 was a nine-month transition period. However, despite a truncated accounting year, the central bank was able to transfer Rs 99,122 crore to the Centre last year.

The RBI's latest dividend is down compared to last year as it may have taken a hit on the income side, with the central bank likely receiving lower interest income from its liquidity management operations.

With the central bank having infused enormous amounts of liquidity into the banking system following the onset of the coronavirus pandemic in March 2020, it conducted huge reverse repo operations to suck out the excess liquidity on a temporary basis in FY22.

The RBI pays banks interest on these reverse repo operations. As such, these form an expenditure for the RBI, reducing its net interest income.

The RBI's detailed accounts will be available in its annual report, which is likely to be released later this month.

For the government, the sharply lower RBI dividend will be a shock.

In recent years, the RBI's dividend has become an even more important source of revenue for the Centre following the change in the central bank's economic capital framework in August 2019. The change resulted 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.