RBI Approves Record Transfer

The Reserve Bank of India (RBI) has approved a record transfer of Rs 2.6 lakh crore as surplus to the Union government for the financial year 2024-’25.

Annual Dividend to Government

Each year, the central bank pays a dividend to the government. This payment is crucial for the government’s finances. It comes from the RBI’s surplus or profit and is a key source of revenue.

Highest Annual Surplus

This year’s transfer marks the highest annual surplus by the central bank. It is also the largest dividend ever transferred to the government, as reported by The Indian Express.

Global Financial Uncertainty

The transfer occurs during a time of global financial uncertainty. Ongoing trade negotiations with the United States could also impact future customs duty revenues, according to Moneycontrol.

Contingency Risk Buffer

Given the economic outlook, the central bank’s board decided to increase the Contingency Risk Buffer to 7.5%. This buffer is a fund maintained by the RBI for use in contingencies.

Economic Growth and Buffer Adjustments

The central bank had kept the buffer at 5.5% of its balance sheet from 2018-’19 to 2021-’22. This measure helped support the economy during challenging times and mitigate the impact of the Covid-19 pandemic.

As economic growth improved in 2022-’23, the buffer was raised to 6%. It was further increased to 6.5% in 2023-’24.