• The Reserve Bank of India will pay a record Rs 2.1 lakh crore dividend to the government for the fiscal ended March 31.

• It is more than double of what was budgeted expectation, helping shore up revenue ahead of a new government taking office.

• The RBI board, at its 608th meeting on May 22, approved the transfer of surplus to the central government. 

• The government had budgeted a receipt of Rs 1.02 lakh crore as dividends from the RBI, public sector banks and financial institutions in the Interim Budget for the fiscal year 2024-25 (April 2024 to March 2025) presented in February this year.

• The dividend or surplus transfer by the RBI to the Centre was Rs 87,416 crore for the fiscal 2022-23. The previous high was Rs 1.76 lakh crore in 2018-19.

• The transferable surplus for 2023-24 has been arrived at on the basis of the Economic Capital Framework (ECF) adopted by it in August 2019, as per recommendations of the Bimal Jalan-headed expert committee.

Economic Capital Framework (ECF)

• The RBI has developed an Economic Capital Framework (ECF) to provide an objective, rule-based, transparent methodology for determining the appropriate level of risk provisions to be made under Section 47 of the Reserve Bank of India Act, 1934. 

• The framework was developed in 2014-15, and while it was used to inform the risk provisioning and surplus distribution decisions for that year, it was formally operationalised in 2015-16.

• In consultation with the government of India, the Central Board of the RBI, in its meeting held on November 19, 2018, constituted an expert committee under the chairmanship of Dr. Bimal Jalan on December 26, 2018 to review the extant Economic Capital Framework of the RBI.

• It was formed to suggest an adequate level of risk provisioning that the RBI needs to maintain and propose a suitable surplus distribution policy taking into account all the likely situations of the RBI.

• The Committee submitted its report to RBI on August 14, 2019. The Central Board of RBI, in its meeting held on August 26, 2019, accepted all the recommendations of the Committee.

• The Committee recommended that the size of realized equity should be adequate to provide for financial and monetary stability risks, as also credit and operational risks and recommends the size of the realised equity in the form of Contingent Risk Buffer (CRB) should be 6.5 per cent of the balance sheet, with a lower bound of 5.5 per cent. This represented 1.2 to 1.4 per cent of the GDP. 

• The transfer of surplus to the government for the year 2018-19, ending June 30, 2019 was made in accordance with the recommendations of the Committee.

• Surplus payable to the central government Under Section 47 of the RBI Act, 1934, after making provisions for bad and doubtful debts, depreciation in assets, contribution to staff and superannuation funds and for all matters for which provisions are to be made by or under the Act or that are usually provided by bankers, the balance of the profits of the Reserve Bank is required to be paid to the central government.

Manorama Yearbook app is now available on Google Play Store and iOS App Store