ECONOMY
RBI’s nod for surprise, record Rs 2.11-lakh crore dividend to govt for FY24
- IBJ Bureau
- May 23, 2024
The board of the Reserve Bank of India (RBI) on Wednesday approved a record surplus transfer of Rs 2.11 lakh crore to the government for the financial year that ended in March 2024, sharply above analysts’ and the government’s projections.
The government had budgeted a dividend of Rs 1.02 lakh crore from the RBI, State-run banks and other financial institutions, interim Budget estimates for 2024-25 show. For FY23, the RBI had transferred Rs 87,400 crore to the government.
“RBI dividend is good for the fiscal position of the government,” Finance Secretary T V Somanathan has said.
The higher dividend from the RBI will further improve the government’s cash position. It has been buying back bonds to infuse cash into the banking system, but a third consecutive buyback on Tuesday saw little success among investors.
“We will only buy those bonds back which come with yields which we like. We will keep doing things pragmatically to manage our cash,” Mr Somanathan has said.
India will decide on lowering both fiscal deficit and market borrowing in the full-year Budget after the formation of a new government, a source familiar with the matter told the Reuters.
A marathon national election is set to conclude on June 1, with counting on June 4. The date for the Budget will only be announced after a government is formed.
Kotak Mahindra Bank Chief Economist Upasna Bhardwaj has said that the “whopping dividend” was likely to be the result of higher interest rates on domestic and foreign securities, significantly higher gross sales of foreign exchange and the low impact of the central bank's liquidity operations.”
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