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RBI Surplus Transfer To Government

RBI Surplus Transfer To Government:

The surplus calculation was based on the Economic Capital Framework (ECF) recommended by the Bimal Jalan committee, which advised the RBI to maintain a Contingent Risk Buffer (CRB) between 5.5% and 6.5% of its balance sheet.

  • This risk provisioning is made primarily from retained earnings and only then is the surplus income transferred to the government as dividends.
  • This range includes provisions for monetary and financial stability risks as well as credit and operational risks.
  • RBI transfers its surplus, which is the excess of income over expenditure, to the government as per Section 47 of the Reserve Bank of India Act, 1934.
  • Reasons for the Increase in RBI’s Surplus: As of March 2024, the RBI had USD 646 billion in foreign exchange reserves, with USD 409 billion parked in top-rated sovereign securities.
  • The RBI’s gross dollar sales were lower in FY24 (USD 153bn) compared to FY23 (USD 213 bn).
  • Despite lower dollar sales in FY24 compared to FY23, the RBI’s management of foreign currency assets ensured continued high revenue.
  • Income from Liquidity Adjustment Facility (LAF) operations also contributed to the overall surplus.