
Mint Quick Edit | RBI's surprise surplus transfer: Use it wisely

Summary
- The Reserve Bank of India decided to transfer a record surplus of ₹2.11 trillion to the government for 2023-24 even after raising its contingent buffer. Whatever led to the bonanza, the Centre should use it to reduce the fiscal deficit.
The latest transfer of surplus to the government approved by the Reserve Bank of India’s (RBI) board came as a big surprise. At ₹2.1 trillion, the figure for 2023-24—to be paid in 2024-25—is the highest ever. It’s nearly double the ₹1.02 trillion anticipated by the Centre for its annual budget.
Also read: India eyes ₹1 lakh crore bonanza from central bank, aiding budget
The figure is so large despite RBI setting aside the highest prescribed 6.5% of its balance sheet as its contingent risk buffer, up from 6% in 2022-23 and 5.5% during the covid years, when the buffer was reduced to lend the economy support. With the economy’s recovery, RBI can afford to raise the buffer again. But what explains such a large payout? Higher interest earned on foreign securities may have spelt a bonanza, as bond yields reigned strong globally in line with high policy rates.
In the past, revaluation gains on RBI’s foreign exchange reserves had helped swell its surplus. The government, on its part, would be chuffed, with over ₹1 trillion extra coming its way. It will give the current year’s final budget, due after the ongoing Lok Sabha polls, some fiscal leeway. The Centre could opt to spend that much more, but it would be better to further reduce the budget’s deficit instead.