Record Rs 2.11 lakh crore RBI dividend to central government for 2023-24
Banking and Finance
5 min read
The Central Board of Directors of the Reserve Bank of India (RBI) has approved the transfer of Rs 2.11 lakh crore as a dividend to the government of India for the financial year 2023-24. This was announced by the RBI after the meeting of its Central Board of Directors on 22 May 2024 in Mumbai. The government of India is the 100 per cent owner of the RBI.
This is perhaps the highest-ever dividend announced by RBI despite the Contingent Buffer Risk being increased to 6.5% for 2023-24.
A dividend is the part of the profit distributed by a company to its shareholders.
What is Contingent Buffer Risk?
Contingent buffer risk refers to the amount of money the RBI has to maintain to meet its current liabilities(such as day-to-day running costs, employee salaries, etc.) and perform its statutory duties, such as monetary and foreign exchange functions.
The Contingent Buffer Risk is part of the Economic Capital Framework of the RBI.
The RBI, in consultation with the government of India, set up a committee to review the Economic Capital Framework of the RBI in 2018. The committee was headed by Bimal Jalan.
Economic Capital Framework
The Economic Capital Framework provides for RBI's profit distribution after considering the appropriate level of risk provision under section 47 of the RBI Act 1934.
The Bimal Jalan committee recommended that the RBI shall maintain a Contingent Buffer Risk, which should be 6.5 per cent to 5.5 per cent of its balance sheet. After meeting the Contingent Buffer Risk requirement, the RBI shall transfer the rest of its profit to the central government.
The Bimal Jalan committee report was adopted by the RBI on 26 August 2019.
Due to corona pandemic, RBI maintained a Contingent Buffer Risk of 5.5 percent of its balance sheet from 2018-19 to 2021-22.
Due to strong economic growth, the Contingent Buffer Risk was increased to 6 per cent in 2022-23 and to 6.5 per cent in 2023-24.
A boost to the government revenue
The money transferred by the RBI will be reflected in the government of India’s account for the financial year 2024-25. In the interim budget of 2024-25, the government of India budgeted a dividend of Rs 1.02 lakh crore.
The higher-than-expected dividend from RBI will boost the government’s spending activity, which will have a positive impact on the Indian economy.
Central Board of RBI
The RBI’s highest decision-making body is the Central Board of RBI. The members of the central board are appointed by the government of india under the RBI Act 1934.
Composition of the Central Board
The members of the board are called directors. As per the provisions of the RBI Act 1934, there can be 21 directors. These directors are:
- RBI Governor and four Deputy Governors of RBI,
- Four Directors, one from each of the four Local Boards,
- Ten Directors nominated by the Central Government, and
- Two Government officials
RBI was set up under the RBI Act 1934, and it started functioning on 1 April 1935.
Governor of RBI - Shaktikanta Das
Deputy Governor of RBI - Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar, Swaminathan J.
Headquarters of RBI: Mumbai
