RBI Approves Record $32 Billion Transfer to Indian Government

The Reserve Bank of India (RBI) has approved a record dividend transfer of 2.69 trillion rupees (approximately $32 billion) to the central government for the fiscal year ending March 2025, marking a significant increase from the previous year's 2.11 trillion rupees. This payout, while slightly below some analysts' estimates, reflects the RBI's decision to bolster its capital by widening the Contingent Risk Buffer to 7.5% of its balance sheet from the earlier range of 5.5%-6.5%, as part of a revised Economic Capital Framework aimed at addressing emerging risks amid volatile global and domestic economic conditions. The RBI's surplus income stems from investments, valuation changes on foreign exchange holdings, and currency printing fees. The decision was made during the RBI's 616th Central Board meeting chaired by Governor Sanjay Malhotra, which also reviewed the bank's annual report and financial statements. This historic payout strengthens the government's finances and aligns with India's budget estimates, supporting economic growth in Asia's third-largest economy. The RBI's cautious approach in maintaining a higher risk buffer aims to ensure financial stability amidst uncertain policy environments, particularly given the impact of fluctuating US Treasury yields on its foreign currency assets.