The Reserve Bank of India (RBI) has announced the approval of highest-ever dividend of Rs 2.11 lakh crore ($25.35 billion) surplus transfer to the federal government for the fiscal year ended in March (FY24). This decision was confirmed in a statement released by the central bank on Wednesday.
The Narendra Modi-led government, in its interim budget estimates for the fiscal year 2024/25, had projected a dividend of Rs 1.02 lakh crore from the RBI, state-run banks, and other financial institutions. The actual transfer amount significantly exceeds these projections.
For the fiscal year 2022/23, the RBI had transferred a surplus of Rs 87,416 crore to the government. This year’s higher surplus transfer reflects improved financial outcomes and operational efficiencies within the central bank.
Additionally, the RBI's board has decided to increase the contingency risk buffer to 6.5 per cent from the previous 6 per cent, aiming to bolster financial stability and risk management.
Last week, the central bank announced a significant fiscal development: a major reduction in the government's borrowing through treasury bills, cutting the amount by Rs 60,000 crore. This move will lower the funds the Centre would have otherwise raised through these short-term instruments.
Additionally, the RBI has implemented measures to support an upcoming operation where the government plans to prematurely repay Rs 60,000 crore of its previous borrowings. Both steps aim to utilise government funds that are currently dormant due to spending constraints linked to the election period.
These actions indicate that the Centre's financial position could see significant improvement in the near future. The RBI, acting as the government's debt manager, is expected to announce the transfer of its surplus funds to the government later in May, further bolstering the Centre's fiscal stability.
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