A sharp 71% rise in income from foreign holdings boosted the Reserve Bank of India’s (RBI’s) profits for FY24, which together with a cut in provisions enabled it to pay the government a record dividend of Rs 2.1 trillion.
The interest income from foreign sources, comprising mainly investments in bonds and deposits, jumped to Rs 1.03 trillion, the central bank said in its annual report released on Thursday.
While the total income for the year increased by 17.04% to Rs 2.75 trillion, the total expenditure declined by 56% to Rs 64,694 crore on the back of a big 67% drop in provisioning.
Consequently, the RBI’s net income rose 141% to Rs 2.11 trillion during FY24, up from `87,416 crore in FY23. Contrary to expectations, the central bank’s gains of Rs 83,616 crore from foreign exchange transactions were smaller than in FY23. Interest income from foreign securities rose to Rs 65,328 crore.
The central bank cut transfers to its contingency fund by 67%, which added to the profits. A provision of `42,819.91 crore was made and transferred to the Contingency Fund (CF) in FY24, sharply lower than `1.30 trillion a year ago. This is a specific provision to help meet contingencies, including depreciation in value of securities, risks arising out of monetary, exchange rate policy operations and systemic risks. The balance in the CF as on March 31, 2024, was `4.28 trillion.
The RBI’s balance sheet increased by 11.1% to `70.47 trillion in FY24. This was 24.1% of GDP, up from 23.5% in March 2023, normalising to the pre-pandemic level. The central board of the RBI had earlier decided to raise the provisions required under the contingent risk buffer (CRB) to 6.50% for FY24 from 6% in previous fiscal, in line with the Jalan committee recommendations.
State Bank of India chief economist Soumya Kanti Ghosh expects that higher dividend payments could continue in FY25. Ghosh noted that the US yields staying above 4% would imply an asset income boost for the RBI besides a bolstering of foreign exchange reserves through dollar purchases. “Thus, there is a large probability of RBI dividend being healthy in FY25 as well and may even be closer to `2.1 trillion,” he observed.