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RBI transfers Rs 87,416 cr dividend to govt; Rs 40,000 cr more than expected
RBI Dividend
Image: wikipedia.org

RBI transfers Rs 87,416 cr dividend to govt; Rs 40,000 cr more than expected

| @indiablooms | 20 May 2023, 12:12 am

Mumbai: The central board of directors of the Reserve Bank of India (RBI) has given its approval for the transfer of Rs 87,416 crore as a dividend to the Centre, media reports said.

This amount is significantly higher than the government's initial expectation of receiving Rs 48,000 crore, Moneycontrol reported.

The dividend transfer for the current period is nearly three times the Rs 30,307 crore that the RBI had transferred to the government in the previous fiscal year, 2021-22.

The increased dividend reflects the improved financial performance and surplus generated by the RBI during the specified period.

The massive hike in dividend transfer occurred even as RBI’s central board of directors raised the Contingency Risk Buffer (CRB) to 6 percent from the existing 5.5 percent.

The Contingency Risk Buffer (CRB) is a provision set aside by the Reserve Bank of India (RBI) to address potential risks and uncertainties.

As described by the Bimal Jalan-led expert committee in 2019, the CRB serves as the country's savings for a 'rainy day'. It acts as a safeguard against various risks, including credit, operational, financial, and those related to monetary stability.

In its report, the Jalan committee recommended maintaining the CRB within the range of 5.5-6.5 percent of the RBI's balance sheet.

Since then, the RBI's board consistently kept the CRB at the lower bound of 5.5 percent, the report said.

However, on May 19, a significant decision was made to raise the CRB by 50 basis points, bringing it to 6 percent. It marks the first increase in the CRB since the committee's recommendations, it added.

One basis point is one-hundredth of a percentage point.

It is important to note that the Jalan committee highlighted the importance of the RBI's 'Available Realised Equity' falling within the range of 5.5 to 6.5 percent as the desired level, the report stated.

This indicates the committee's recognition of the need for maintaining an adequate buffer to handle potential risks effectively.

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