Reserve Bank of India's Expected Surplus Transfer for FY25
The Reserve Bank of India (RBI) is projected to transfer a surplus between ₹2.2 trillion and ₹3.1 trillion to the government for the financial year 2024-25 (FY25), compared to a record ₹2.1 trillion in FY24, according to a Business Standard poll.
Factors Contributing to Higher Surplus
- The increased surplus is attributed to substantial dollar sales and interest earnings from foreign and rupee-denominated securities.
- Earnings on foreign exchange transactions are expected to be significant, with gross dollar sales at $371.6 billion in FY25 (till February), up from $153 billion in FY24.
- The historical cost of dollar purchase is 68.4, which is significantly below the current spot rate, resulting in gains from FX intervention.
- Interest income from RBI's holdings of foreign currency assets and rupee securities is anticipated to be slightly lower than the previous year.
Dollar Transactions and Gains
The RBI has been a net seller of dollars from October 2024 to February 2025, with March data pending. It was a net buyer in the first half of FY25, purchasing $8.52 billion worth of US dollars, compared to $41.27 billion in FY24.
Surplus Transfer Process
- The surplus is derived from investment earnings, valuation gains on foreign exchange reserves, and currency issuance fees.
- As per the RBI Act, the surplus is transferred after setting aside provisions for bad debts, asset depreciation, employee welfare, and other contingencies.
Profit Realization
Experts highlight that the RBI's profit was realized by accumulating US dollars when the exchange rate was low (₹83-₹84 per dollar) and selling them at higher rates (₹84-₹87 per dollar).
Budget Estimates and Financial Management
- The government expects to receive ₹2.56 trillion from the RBI and public sector banks, as per Budget estimates.
- The State Bank of India (SBI) notes that the RBI's proactive management of external shocks amidst a challenging global environment supports the expected rise in dividend payouts.
- Purchasing foreign currencies helps stabilize the rupee, boosting liquidity, and improving the RBI's financial position, contributing to higher profitability and dividend payouts in FY25.
