Surplus: As FinMin prepares the FY25 budget, RBI transfers Rs. 2.1 trillion to the Centre
Virendra Pandit
New Delhi: The Board of the Reserve Bank of India (RBI), on Wednesday, approved the transfer of Rs 2.1 trillion (Rs 2,10,874 crore) as surplus to the Centre for the accounting year 2023-24.
This significant transfer is expected to reduce the government’s borrowing requirements and positively impact G-Sec yields.
During its 608th meeting of the Central Board, held in Mumbai under the chairmanship of Governor Shaktikanta Das, the RBI reviewed the global and domestic economic scenario, including risks to the outlook.
The RBI informed that the Board discussed the working of the central bank between April 2023 and March 2024, and approved the Annual Report and Financial Statements for the year 2023-24.
“The transferable surplus for the year (2023-24) arrived on the basis of the Economic Capital Framework (ECF) adopted by the Reserve Bank on August 26, 2019, as per recommendations of the expert committee to review the extant ECF of the RBI,” the RBI statement said, according to the media reports.
The Committee had suggested maintaining the risk provisioning within a range of 5.5 to 6.5 percent of the RBI’s balance sheet under the Contingent Risk Buffer (CRB).
The RBI stated, “During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the Covid-19 pandemic, the Board had decided to maintain the CRB at 5.5 percent of the Reserve Bank’s balance sheet size to support growth and overall economic activity.”
After the economic growth recovery in FY23, the CRB was raised to 6 percent. Given the continued strength and resilience of the economy, the Board raised the CRB to 6.5 percent for FY24, and now authorized the transfer of Rs 2,10,874 crore as surplus to the Centre for the accounting year 2023-24.
Deputy Governors Michael Debabrata Patra, M Rajeshwar Rao, T Rabi Sankar, Swaminathan J, along with other Directors of the Central Board, including Satish K Marathe, Revathy Iyer, Anand Gopal Mahindra, Venu Srinivasan, Pankaj Ramanbhai Patel, and Ravindra H Dholakia, were present at the meeting.
Ajay Seth, Secretary of the Department of Economic Affairs, and Vivek Joshi, Secretary of the Department of Financial Services, were also in attendance.
Meanwhile, the Union Finance Ministry is preparing the new government’s first full budget amid the ongoing Lok Sabha election heat. Results of the parliamentary polls will be declared on June 4 and the new government is expected to take office thereafter. The budget for FY25 is likely to be finalized in two weeks after the next government’s formation and tabled in early July.
This budget-making process is important as it transitions from the interim to the full budget, reflecting potential changes based on the election outcomes. Depending on whether the NDA retains power or the INDIA bloc wins, the budget will need to accommodate new schemes and policy adjustments.
