The Reserve Bank of India (RBI) may give the government a larger dividend than it did last year—possibly in the range of ₹1 lakh crore—according to recent moves, which might help New Delhi's budget.
The RBI announced a sharp reduction in the government's Treasury Bill borrowing last week, which resulted in a ₹60,000crore decrease in the amount of money the Center would have been able to raise through these short-term instruments.
The government intends to repay ₹60,000 crore of past borrowings ahead of schedule, and the central bank has taken steps to guarantee a better outcome for this operation.
These two measures, which aim to employ public monies that are presently unused because of spending restrictions connected to the election, also give hope that the Center's coffers will soon be generously refilled.
The government's debt manager, the RBI, is probably going to declare in late May that its excess money would be transferred to the government.
Kanika Pasricha, the chief economic advisor at Union Bank of India, recently stated in a research note, "We expect the RBI to transfer a surplus of INR 1,000 billion (₹1 lakh crore) to the government in FY25... while there are many moving parts in the RBI dividend calculation, our assessment shows a likely repeat of a strong dividend number."
Revenue from International Assets
Analyst calculations based on publicly available data on the RBI's balance sheet argue that the central bank should exceed the ₹87,416 crore excess transfer to the Center from the previous year.
After deducting all operational expenditures from total income, we arrive at a surplus of ₹3.4 trillion (₹3.4 lakh crore) before making any provisions. "After deducting ₹2.2 trillion in provisions, we are left with a dividend of ₹1.2 trillion," A Prasanna, the head of research at ICICI Securities Primary Dealership, stated in a recent client note. "Such a large dividend is likely to be paired with the maximum permissible rise in (the central bank's) core capital ratio as well, thereby strengthening RBI's balance sheet for a rainy day."
A significant gain in interest that the RBI would have received on its foreign exchange holdings in the midst of the US Federal Reserve's aggressive rate hikes over the last several years is one of the main variables that may lead to a significant surplus transfer.
Furthermore, economists still predict a significant increase in the central bank's revenues from foreign assets, even though the RBI's gross sales and purchases of US dollars were lower in FY24 than they were in FY23, a year in which the central bank intervened significantly in the markets to protect the rupee from excessive volatility.
