RBI to transfer Rs 99,122 crore surplus to the central government

The Reserve Bank of India’s board approved the transfer of Rs 99,122 crore as surplus to the central government for the accounting period of 9 months ended March 31, 2021, the RBI said in a press release on Friday. The decision to transfer the surplus to the central government was taken at the meeting of the Central Board of Directors of the Reserve Bank of India.

The surplus was decided on while holding the contingency risk buffer at 5.5%, the RBI said. The RBI is transitioning to an April-March accounting year from the financial year 2022, and hence it has reported the surplus for a nine-month period.

The larger-than-expected surplus has partly resulted from a recent change in the central bank’s accounting policy for forex gains.

The higher transfer will come to the support of government finances. As in the financial year 2022 budget presentation in February, the central government had budgeted for Rs 53,511 crore as a surplus transfer from the RBI.

The Reserve Bank of India Board also reviewed the current economic situation, domestic and global challenges, and recent policy measures taken by the central bank to mitigate the unfavourable impact of the second wave of COVID-19 on the economy.
RBI surplus transfer to government rises
The surplus amount transfer is the highest since the financial year 2018-19 when the RBI had transferred Rs 1,75,987 crore, which included a one-time payout on account of a change in the RBI’s Economic Capital Framework. Under the new framework, the central bank is required to maintain a contingency risk buffer of 5.5-6.5% of its balance sheet.

The last 5 years surplus transfer to central government –

FY21 – Rs 99,122 Cr
FY20 – Rs 57,128 Cr
FY19 – Rs 1,75,987 Cr
FY18 – Rs 50,000 Cr
FY17 – Rs 30,659 Cr

What could have led to a higher surplus?

The surplus is the amount RBI transfers to the government every year. In the previous fiscal, RBI transferred Rs 57,128 crore surplus to the government, which is increased by 73.5 per cent to Rs 99,122 crore in the current financial year.

RBI’s income comes mainly through interest on the securities it holds. In the financial year 2020-21, the RBI has earned income from a larger amount of open market operations, as bond purchases by the central bank raises the amount of interest it earns. Larger foreign exchange reserves also added to its earnings. India’s foreign exchange reserves have risen to $590 billion as of the week ended April 14, 2021.