The Centre must not become reliant on RBI payouts1 min read 24 May 2023, 11:07 PM IST
The central bank’s dividend payout jump was enabled by an exceptional rise in currency trading profits in a year of heavy outflows, but it must never be under any pressure to profit
Last week’s big bump-up in the Reserve Bank of India’s (RBI) annual dividend payout to the government would have pleased the Centre as it looks to squeeze every source of inflows to keep its heavy social and development expenditure going. RBI’s board approved the transfer of a ₹87,416 crore “surplus" for fiscal 2022-23. This is almost thrice the ₹30,307 crore it sent across the previous year. To the extent this money helps the government restrain its market borrowing, it will ease upward pressure on debt market yields and free bank credit for private productive purposes. Interestingly, RBI managed such a big payout despite raising the contingency risk buffer it must always maintain to 6% from 5.5%. This was enabled by currency-operation profits made on the back of heavy US dollar sales in support of the rupee’s exchange value. Its intent was to keep volatility in check, but it also gave our central bank a one-off bounty in a war-stricken year. Latest RBI data shows that it sold more dollars in 2022-23 than it bought, unlike the preceding two years. Its overall sales over the year exceeded its purchases of nearly $187.1 billion by a bit over $25.5 billion.