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Centre may see big jump in RBI dividend in FY24
May 09, 2023
The Centre is likely to make windfall gains by way of annual dividend receipts from the Reserve Bank of India (RBI), which is estimated to have garnered substantial profits in foreign-currency trading and by lending to the local banking system after the rise in policy rates and liquidity drainage prompted high-street lenders to borrow more from the RBI.
The Budget has estimated receipts of ₹48,000 crore in FY24 by way of total dividends from public sector banks and the RBI.
“Given the large levels of dollar sales and low provisioning requirements, the RBI dividend is expected to exceed Budget estimates,” Gaura Sengupta, India economist, IDFC First Bank, said in her recent report. “We estimate that the dividend from the RBI could range between ₹70,000 crore and ₹80,000 crore. The better-than-expected RBI dividend will balance some of the risks facing tax revenue collections, from slower-than-budgeted nominal GDP growth.” For FY22, the central bank had transferred a surplus of ₹30,307 crore to the Centre.
Combined gains out of foreign currency sales and interest on loans to the local banking system may more than offset the mark-to-market losses on bond portfolios – both local and overseas. The valuation of foreign exchange transactions at historical costs could help the central bank that sold a gross $206 billion during April-Feb of FY23, up from $96 billion in the previous fiscal.
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