The budget estimated receipts of ₹48,000 crore in FY24 from total dividends from public sector banks and the RBI.
“Given high levels of dollar sales and low provisioning requirements, the RBI’s dividend is expected to exceed budget estimates,” said Gaura Sengupta, Indian Economist, IDFC First Bank, in her recent report. “We estimate that the RBI dividend could range between ₹70,000-80,000 crore. The better than expected RBI dividend will balance out some of the risks facing tax revenue collections, due to a growth in Nominal GDP slower than expected.” For FY22, the central bank had transferred a surplus of ₹30,307 crore to the Centre.
The combined gains on currency sales and interest on loans to the local banking system can more than offset market losses on bond portfolios – both local and overseas. Assessing foreign exchange transactions at historic costs could help the central bank which grossly sold $206 billion between April and February FY23, compared to $96 billion in the previous fiscal year.
The revised central bank accounting framework, as recommended by a committee headed by former governor Bimal Jalan and adopted in 2019, stipulates that the accounting practice of foreign exchange transactions should be linked to historical costs compared to the previous practice of foreign exchange transactions. weekly costs.
The average historical cost of purchases in dollars is estimated at around Rs 63 per unit. But the market price at which RBI sold dollars averaged Rs.80 during the year. The RBI had earned Rs 68,990 crore in FY22 from its foreign exchange transactions involving gross dollar sales of $96 billion. Therefore, the revenue from the sale of over $200 billion could be substantial after adjusting for dollar purchases during the year and other swaps and forward transactions.
“Thus, the total amount of currency sold relative to the total bought is large, and the RBI is likely to find space to pay dividends from a lower need for capital adequacy and profits made on the foreign exchange transactions,” said Rahul Bajoria, Head of Asian Emerging Markets (ex China), Economic Research, Barclays Capital.
A higher dividend outflow could also be due to higher interest rates during the year and the RBI was in reverse repo mode, according to Madan Sabnavis, Chief Economist, Bank of Baroda.
Interest income on bond holdings and the Liquidity Adjustment Facility (LAF) should also not be materially higher. But lending to banks under various windows can generate higher interest income, as the benchmark repo rates against which it lends to banks have climbed 2.5 percentage points over the year.
Outstanding loans and advances to commercial banks alone stand at Rs 1.65 lakh crore – Rs 70,000 crore more in FY23. In addition, there is additional exposure of Rs 1.11 lakh crore to other entities, which is Rs 30,000 more than the previous year. This could lead to a sharp increase in interest income from loans and advances for the central bank. In FY22, the RBI earned Rs 1,500 crore on domestic loans and portfolio advances of Rs 1.3 lakh crore.