The Reserve Bank of India’s Central Board Friday approved the transfer of Rs 87,416 crore as surplus, or dividend, to the Union Government for the accounting year 2022-23, providing a major boost to the latter’s fiscal position. This is a 188 per cent jump from the last year’s (2021-22) surplus transfer of Rs 30,307 crore, which was also the lowest in 10 years. As public sector banks have also reported very good profits and announced dividends, there will likely be higher flows of dividends from this source as well. Add to this the possible higher dividend payments by the oil marketing companies and the situation appears quite comfortable from a market borrowings perspective, said an analyst. The RBI normally pays the dividend from the surplus income it earns on investments and valuation changes on its dollar holdings and the fees it gets from printing currency, among others. The rupee depreciation against the dollar also weighs on the surplus transfer. The RBI had transferred Rs 99,126 crore in FY21 to the government. In FY19, it approved a record transfer of Rs 176,051 crore to the government, including a surplus or dividend of Rs 1,23,414 crore, and a one-time transfer of excess provisions amounting to Rs 52,637 crore. “This year's transfer will come in very handy and ensure that the government manages its fiscal numbers with relative ease given that there are question marks on the divestment programme,” said Madan Sabnavis, Chief Economist, Bank of Baroda. The Union Budget had pegged a number of Rs 48,000 crore as dividend from public sector banks and the RBI. The RBI has effectively overshot this number. This was enabled by higher earnings on sale of forex during the year, better returns on forex investments in US treasuries (though value of bonds would have fallen which has to be charged to the contingency reserve), revaluation of forex assets and adjustments in reserves as per the Bimal Jalan Committee recommendations. “The RBI would have had higher pay-outs due to the higher SDF rates with the system being in surplus all through the year,” Sabnavis said. The fiscal buffer of RBI surplus transfer would be handy, especially as tax buoyancy may undershoot budget estimates. “Even so, we do not see the fiscal deficit missing the target in FY24. Separately, frictional liquidity will likely ease in the near term with dividend inflows and seasonal moderation in currency demand. However, liquidity conditions are likely to remain tight ahead, requiring the RBI to add durable liquidity in the form of open market operations worth Rs 1.5 lakh crore in the second half of FY24,” Emkay Global Financial Services said. The additional bounty could account for 0.15-0.2 per cent of GDP (with possibly higher dividend from banks as well) which could partly offset potential losses on account of possibly lower divestment, telecom pay-outs or even tax revenues.
