Banks may be facing a squeeze on their profitability from the tight monetary policy, but it is bonanza time for the Reserve Bank of India (RBI), which acts as banker to the banking industry as well as the government.
On Thursday, the Reserve Bank of India said it would pay a hefty surplus profit of Rs 15,011 crore to the Government of India for the year ended June 30, 2008.
In 2006-07, the central bank had transferred Rs 45,719 crore as surplus to the government, which included Rs 34,308.60 crore on account of profit on sale of SBI shares held by the RBI. Excluding this amount, the transfer of surplus for the year ended June 30, 2007 was Rs 11, 411 crore. RBI follows a July-June financial year.
Effectively, the government?s earnings from RBI have gone up by 31.55% during 2007-08. During the board meeting, which was held on Thursday, the central bank approved the dividend to be paid to the government.
?The components of the surplus profit paid to the GoI are being worked out. We anticipate income from a huge chunk of government securities transactions to constitute a large proportion of the surplus transferred this year,? said an RBI official.
The surplus for the previous year, 2006-07, which was transferred to the government, included Rs 1,914 crore towards interest differential on special securities converted into marketable securities, intended to compensate the government for the difference in interest expenditure that the government had to bear consequent on the conversion of special securities.
Over the years, RBI?s contributions to the government?s kitty have seen a steady rise and have almost doubled between 2005-06 and 2007-08.
In 2005-06, the profit transferred was Rs 8,404 crore, while in 2004-06, the figure was Rs 5,400 crore.
During 2006-07, domestic income, which is excluding the profit on sale of SBI shares to the GoI, increased to Rs 5,886.74 crore against Rs 1,782.28 crore in 2005-06. This was mainly on account of lower provisioning for depreciation on securities held in the bank?s portfolio. Higher net interest earned under the liquidity adjustment facility during 2006-07 also contributed to higher income. RBI had said that total expenditure increased by 22.5%, from Rs 5,849.10 crore in 2005-06 to Rs 7,164.25 crore in 2006-07.
