A youth walks past the entrance of the Reserve Bank of India head office in Mumbai on Nov. 17, 2021. India’s central bank raised its main lending rate off record lows in a surprise move on Wednesday to contain rising inflation, shocking markets and pushing the benchmark 10-year bond yield to its highest levels in three years.
Punit Paranjpe | Afp | Getty Images
The board of India’s central bank approved a record surplus transfer of 2.11 trillion rupees ($25.35 billion) to the government for the fiscal year ended March, sharply above analysts’ and government projections.
The government had budgeted a dividend of 1.02 trillion rupees from the Reserve Bank of India, state-run banks and other financial institutions, interim budget estimates for the fiscal year 2024/25 show.
For FY23, the RBI transferred 874.16 billion rupees to the government.
Higher interest earned on securities owned by the RBI probably boosted overall income, providing for a higher transfer to the government, said Garima Kapoor, an economist and senior vice president at Elara Capital.
“This gives the government significant elbow room to manage any welfare spending and sustain capex spending even if the disinvestment receipts fall short,” she added.
The RBI board also decided to raise the contingency risk buffer (CRB) to 6.5% from 6% previously.
Analysts had expected a surplus transfer in the range of 750 billion rupees to 1.2 trillion rupees, aided by strong foreign exchange earnings.
“As the economy remains robust and resilient, the board has decided to increase the CRB to 6.50% for FY 2023-24,” the RBI said in a statement.
India’s benchmark 10-year bond yield dropped four basis points to 7.00% after the announcement.
The bank’s board reviewed the global and domestic economic scenario, including risks to the outlook, the statement added.
