The Reserve Bank of India (RBI) on Friday said it will transfer a surplus of Rs 99,122 crore to the government for the nine-month period ended March 31, 2021, 73.5% higher than the Rs 57,128 crore transferred for 2019-20.
With the change in the central bank’s accounting year to April-March from July-June earlier, its board discussed its functioning during the transition period of nine months (July 2020-March 2021) and approved the annual report and accounts for the transition period.
“The Board in its meeting reviewed the current economic situation, global and domestic challenges and recent policy measures taken by the Reserve Bank to mitigate the adverse impact of the second wave of Covid-19 on the economy,” the RBI said in a release. The central board decided to maintain the contingency risk buffer at 5.5%.
It was not immediately clear what contributed to the surge in the quantum of dividend transfer, but a likely reason could be higher earnings from RBI’s market operations during the year. RBI governor Shaktikanta Das said during the April monetary policy review that the central bank had made net outright purchases amounting to ₹3.13 lakh crore during 2020-21. A larger number of OMOs results in higher interest income for the RBI. The annual report, when released, could offer greater clarity on this.
The Union government had budgeted a total Rs 1 lakh crore worth of earnings by way of total dividend from RBI and public-sector enterprises in FY22. The quantum of the RBI’s surplus transfer will likely ensure that the government exceeds its revenue target under this head.
Aditi Nayar, chief economist, Icra, said the higher-than-budgeted surplus transfer will offer a buffer to the government to absorb the losses in indirect tax revenues that are anticipated in May-June 2021. Tax revenues could take a knock from the impact of the now widespread state lockdowns on the level of consumption on discretionary items and contact-intensive services.
“Moreover, high commodity prices at a time when demand and pricing power are subdued, would dent the margins of corporates in many sectors, compressing the growth in direct tax collections,” Nayar said.