The Central Board of Reserve Bank of India (RBI) will meet on Friday to consider approving dividend payment, or transfer of surplus capital from its balance sheet to the Centre, along with approving the annual report and accounts for FY23, people aware of the development said.
“The RBI settles its annual accounts in May and the Central Board meeting is scheduled on Friday (May 19). The transfer of surplus amount will be decided in accordance with the recommendations made by Bimal Jalan committee,” a source said. The RBI will also meet board of directors of public and private sector banks later this month, the sources added.
According to the FY24 Budget estimates, the Centre is expecting the RBI and other public sector lenders to declare `48,000 crore in dividends for the previous financial year. For the financial year ending March 2022, the central bank had transferred a surplus amount of `30,307 crore to the Centre, while deciding to maintain the Contingency Risk Buffer at 5.50%. The FY22 dividend was sharply lower than the Centre’s estimated receipt of `73,948 crore from the central bank and public sector financial institutions.
IDFC First Bank economist Gaura Sen Gupta said the RBI’s dividend for FY23 is likely to exceed Budget estimate, supported by large gross dollar sales in FY23 and likely lower provisioning requirement. In a note on May 3, Sen Gupta said the RBI will likely transfer dividend amounting to `70,000-80,000 crore for the previous fiscal to the Centre.
“Gross dollar sales are tracking at $206.4 billion in FYTD23 (till Feb 2023) versus $96.7 billion in FY22. The revenues from dollar sales are likely to be substantial given that historical cost of dollar purchase is tracking at 62.7. Meanwhile, the need for provisioning will be low with RBI’s economic capital tracking at 25.8% of total assets as of March 24, 2023,” Sen Gupta said, adding that the revaluation gains made on FX reserves outweigh the mark-to-market losses on government securities.
The Bimal Jalan committee had, in 2019, recommended a surplus distribution policy which targets the level of realised equity to be maintained by the RBI, within the overall level of its economic capital as against the earlier policy which targeted total economic capital level alone.
Only if the realised equity is above its requirement, will the entire net income be transferable to the government. If it is below the lower end of requirement, risk provisioning will be made to the extent necessary and only the residual net income, if any, will be transferred to the government. Lastly, within the range of contingent risk buffer of 6.5-5.5% of the balance sheet, the Central Board will decide on the level of risk provisioning.