The Hindu: Published on 25 May 2025:
Why in News:
The Reserve Bank of India (RBI) announced a record transfer of ₹2.69 lakh crore as surplus to the Central Government for the financial year 2024–25 — exceeding even government estimates and surpassing last year’s record transfer of ₹2.11 lakh crore.
Background:
The RBI earns profits from activities like:
Seigniorage (profit from currency issuance),
Interest on loans to banks/government,
Returns on foreign assets/investments.
Under Section 47 of the RBI Act, 1934, the surplus (after provisioning and expenses) is transferred to the Government of India.
How Does RBI Make Money?
Seigniorage: Difference between the face value of currency and its production cost.
Interest income: From loans to banks, government, and investments.
Forex reserves management: Gains from buying/selling foreign currencies and assets.
Liquidity operations: Tools like repo/reverse repo also generate income.
Why Isn’t It a Dividend?
The RBI isn’t a company with shareholders.
Surplus is a statutory transfer under the RBI Act, not a dividend in the corporate sense.
What is the Contingent Risk Buffer (CRB)?
The CRB is a financial safety net maintained by the RBI for unforeseen risks or economic shocks.
Based on the Bimal Jalan Committee’s 2019 recommendations, CRB should be within 5.5–6.5% of RBI’s balance sheet.
In 2024–25, the RBI revised the CRB range to 4.5–7.5%, keeping it at the upper limit of 7.5%.
Reasons for Record Surplus Transfer:
Higher foreign exchange sales during market interventions.
Increased earnings from foreign investments and assets.
Widened CRB range, giving flexibility in provisioning.
Despite higher provisioning (CRB at 7.5%), profits were strong enough to allow a record transfer.
Budgeted vs Actual:
Budgeted: ₹2.56 lakh crore from RBI + PSU banks.
Actual (RBI alone): ₹2.69 lakh crore — exceeding budget.
Total receipts under this head are now likely to significantly exceed estimates.
Past Controversies:
In 2018, tensions rose when the government sought a higher surplus and the RBI resisted.
Deputy Governor Viral Acharya warned of undermining central bank independence.
Former Governor Urjit Patel resigned following disagreements.
PM Modi’s alleged remark calling the RBI a “snake sitting on a hoard of money” underscored the friction.
The issue cooled post-adoption of the Jalan Committee framework.
Are Such Transfers the New Normal?
Possibly not. This year’s surplus was boosted by favorable forex gains, which may not recur.
However, with greater flexibility in CRB (as low as 4.5%), future transfers could remain high if conditions allow.
Key Takeaway:
The record surplus shows the RBI’s strong balance sheet and operational efficiency but also reflects its growing importance in supporting government finances. However, careful management of buffers and respect for institutional autonomy remain crucial to long-term economic stability.
