Money & Banking

RBI surplus transfer to government sharply down at ₹30,307 crore

BL Mumbai Bureau | | Updated on: May 21, 2022
Last year in May, RBI declared a dividend of ₹99,122 crore for the nine-month period(July 2020-March 2021)

Last year in May, RBI declared a dividend of ₹99,122 crore for the nine-month period(July 2020-March 2021)

Lowest transfer in a decade because of absorbing liquidity from banks via reverse repo

The Reserve Bank of India’s (RBI) Board approved a sharply lower surplus transfer of ₹30,307 crore to the government for the accounting year 2021-22, the lowest in 10 years. This is in sharp contrast to the surplus transfer of ₹99,122 crore for nine months ended March 31, 2021 (July 2020-March 2021).

The lower surplus transfer is due to RBI’s absorption of huge amount of liquidity from banks under the reverse repo windows and paying interest to them.

Slippage fears

Madan Sabnavis, Chief Economist, Bank of Baroda, observed that in FY22, due to RBI’s heavy investment in reverse repo auctions at an average of ₹6 to 7-lakh crore a day at an average cost of 3.5 per cent, would mean an outgo of ₹21,000-24,500 crore.

If the outgo on account of the reverse repo auction had been less, the surplus declared to the government would have been higher. Sabnavis noted that for FY23, the government is targeting about ₹74,000 crore as dividend/surplus from RBI, public sector banks (PSBs) and other public financial institutions (FIs).

“This (RBI’s surplus transfer to government) will mean that a large part of PSBs and FIs profit will have to be transferred to make good this number or else there will be a slippage,” he said.

Contingency risk buffer

The contingency risk buffer (CRB) has been maintained at 5.50 per cent (of RBI’s balance sheet), according to an RBI statement. CRB is the country’s savings for a ‘rainy day’ (a financial stability crisis) which has been consciously maintained with RBI in view of its role as lender of last resort (LoLR).

The board, in its meeting held in Mumbai on Friday, reviewed the current economic situation, global and domestic challenges and the impact of recent geopolitical developments. It also approved the RBI’s annual report and accounts for the accounting year 2021-22.

In FY21, the RBI had transitioned to the April-March accounting year from July-June earlier.

Published on May 20, 2022
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