The Reserve Bank of India’s (RBI) Annual Review and Surplus Fund Transfer
The Reserve Bank of India (RBI) is scheduled to hold its central board of directors meeting on May 23 to conduct an annual review of its balance sheet and discuss the transfer of surplus funds for FY25.
Expected Dividend Payout
- The expected payout to the government could reach up to Rs 3 lakh crore, marking nearly a 50% increase from the previous year's dividend.
- Gaura Sen Gupta, chief economist at IDFC First Bank, estimates the dividend to be between Rs 2.6 lakh crore to Rs 3 lakh crore, contingent on provisioning levels.
Economic Capital Framework (ECF)
- The RBI board reviewed the Economic Capital Framework (ECF) on May 15, 2019.
- The ECF plays a crucial role in determining the surplus or dividend, with recommendations for risk provisioning under the Contingent Risk Buffer (CRB) ranging from 6.5% to 5.5% of the RBI’s balance sheet.
Factors Affecting Payout
- The payout is influenced by income from various domestic sources.
- The decision on the level of CRB is based on the expected economic performance during the review period and is directly linked to annual economic growth.
Market Expectations and Bond Yields
- The market expects a dividend of approximately Rs 2.5 lakh crore.
- Alok Singh, group treasury head at CSB Bank, notes that any increase would impact bond yields.
Contingency Provisions
- Contingency provisions are anticipated to be similar to or higher than the previous year.
- Last year's provisions stood at Rs 42,800 crore, with expectations ranging from Rs 40,000 crore to Rs 80,000 crore, according to IDFC First Bank.
