RBI Transfers Rs 30,307-Crore Surplus To Government

The Reserve Bank of India will transfer a surplus of Rs 30,307 crore to the government for the accounting year 2021-22, the central board decided at a meeting on Friday. The surplus transferred is sharply lower than the Rs 99,122 crore for the period July 2020-March 2021.

"The board approved the transfer of Rs 30,307 crore as surplus to the central government for the accounting year 2021-22, while deciding to maintain the contingency risk buffer at 5.50%." This is the lowest transfer since 2011-12.

In 2018-19, the RBI adopted a new Economic Capital Framework. Under the new framework, the RBI is required to maintain a contingency risk buffer of 5.5-6.5% of its balance sheet. The central bank has chosen to maintain the lowest required buffer for the second year running.

The central bank’s annual report, which details its expenses and earnings for the year, is yet to be released. However, it likely had to transfer funds from its earnings to maintain the contingency risk buffer at the minimum required level.

As the RBI balance sheet expanded over the course of the year, both via domestic bond purchases and accumulation of foreign currency assets, the central bank would have had to set aside more buffers from its earnings. This would have brought down the surplus transfer.

However, unlike previous years, when the RBI's surplus transfer was an important factor in the government being able to meet its fiscal deficit target, in FY22 strong tax collections have alleviated any such pressure.

“The amount of surplus to be transferred by the RBI to the Government appears to be modestly lower than the budgeted amount. However, the tax receipts are expected to substantially surpass the budgeted level, absorbing the impact of the former,” said Aditi Nayar, chief economist at ICRA.