Mumbai: The Reserve Bank of India will pay of highest ever RS 2.1 trillion dividend to the government for the fiscal year ended at March 31. The RBI board, at its meeting today, approved the transfer of surplus to the central bank said in statement to the reporters.
Total RS 2.11 trillion dividend transfer by the Reserve Bank of India to the Centre is expected to give the next government a fiscal cushion for the expenditure management, experts said.
Vivek Kumar, economist said to channel that the higher than expected dividend gives a fiscal cushion of 35 to 40 basis points as a ratio to the GDP. This would cover any potential revenue losses such as disinvestment, or more importantly create a room for additional spending.
Earlier the government had budgeted a receipts of RS 1.02 trillion as dividends from the RBI, Public Sector Banks(PSU) and financial institutions in the interim budget for the fiscal year 2024-25 (April 2024 to March 2025) presented in the February this year.
The Surplus transfer by the RBI to the Center was RS 87,416 crore for the fiscal 2022-23. The previous was RS 1.76 crore in 2018-19. This was previous record in the past year but currently surplus released by RBI was highest ever than previous one.
The decision on the surplus was taken at the 608th meeting of the Central Board of Directors of the Reserve Bank of India held under the Chairmanship of Governor Shakitkanta Das.
The government under its fiscal glide path, wants to bring down the fiscal deficit to 4.5% of GDP by FY26. The Interim Budget tabled in Parliament in February has set the fiscal deficit target for FY25 at 5.1% of the GDP full budget is expected to coming in June or July after formation of new government.
The higher than budget RBI surplus transfer would help to boost the central government’s resources envelope in FY25, allowing for enhanced expenditures than what was pencilled into thr Interm budget for FY25.
The RBI board after decision on the surplus, they also reviewed the global and domestic economic scenario, including risks to the growth outlook. The Board discussed the working of the RBI during 2023-24 and approved its Annual Report and Financial Statement for the last fiscal.
The RBI said during accounting years 2018-19 to 2021-22, bad economic conditions and cause of Covid-19 pandemic, the had decided to maintain the Contingent Risk Buffer(CRB) AT 5.50% of the Reserve Bank’s balance sheet size to support growth and overall economic activity.
Now revival in the economic growth in FY 2022-23, the CRB was increased to 6.00%. As the economy remains resilient, the board has decided to increases the CRB to 6.50% for FY 2023-24.
Increasing the funds available for capex would certainly will boost the quality of the fiscal deficit. However, the additional spending may be difficult to incur within the eight- odd months left after the Final Budget is presented and approved by parliament, said Aditi Nayar to a channel . Aditi is chief economist, head of research and outreach, ICRA.
Economists said that the the government may not need much borrowing because of the highest- ever transfer of surplus to the government. This could be potentially lower the G-sec borrowing requirement and help guide interest rates lower, Kumar said to a channel.
The Central government in March announced that borrowing 53.07% of its full year target in the April-September of FY25(First-half) and six month target is total of RS 7.50 trillion and total stand out at RS 14.13 trillion.