RBI: RBI’s forex, yield moves can strain its books

The Centre has projected a conservative estimate of dividends from the Reserve Bank of India (RBI) and banks for FY23 at ₹74,000 crore, though the revised estimates for FY22 at ₹1 lakh crore is almost double the ₹53,000 crore budgeted for the year.

Central bank earnings are expected to fall due to a decline in interest rates in overseas bank deposits and securities (in which foreign exchange reserves are parked), though yields have started hardening only toward the end of the fiscal.

Also, deployable reserves may not rise substantially as forex reserves have risen by only $57 billion so far in the current fiscal compared to $101 billion in the same period a year ago. Besides, interest outgo to banks on account of the central bank’s liquidity absorption from the banking system is expected to be higher this year.

The estimate is ₹27,400 crore, lower than the Revised Estimates (RE) of ₹1.01 lakh crore under the head of dividend or surplus of Reserve Bank, nationalised banks and financial institutions during the current fiscal.

The RBI paid a dividend of ₹99,122 crore for FY21. The amount was paid during the current financial year in May 2021. RBI’s balance sheet size increased 6.99% for the year ended March 31, 2021, though it was a truncated year as it shifted to a March account-closing year from June earlier.

While income for the year decreased 10.96%, the expenditure decreased by 63.10%, which helped the central bank transfer a record surplus to the government during the year.