The Reserve Bank of India (RBI) has announced to give a dividend of 2.69 lakh crores to the government for the financial year 2024-25. This is the biggest surplus transfer that the government has received in any year so far. Earlier, in 2023-24, RBI had transferred 2.1 lakh crores and in 2022-23, 87,420 crores to the government.

Why did the government get so much money?

RBI has earned a good amount from foreign exchange assets this time. Apart from this, the bank has also made huge profits from VRR (Variable Rate Reverse Repo) operations and foreign exchange sales. Not only this, the fluctuations in interest rates in the last financial year also increased the earnings of the Reserve Bank.

What is the benefit to the government?

The government had set a target of raising 2.56 lakh crores from RBI, public sector banks and other financial institutions this year. But getting 2.69 lakh crores from RBI itself is like a bonus for the government. Experts believe that this can help the government with an additional 50,000 to 60,000 crores. However, this will not bring a big change in the fiscal deficit. It is estimated that the deficit can go down slightly from 4.4 percent to 4.3 percent.

What is CRB and why was it increased?

A Contingent Risk Buffer (CRB) is created to keep the balance sheet of RBI safe. Consider it a kind of 'safety shield' which helps in dealing with any economic crisis. Earlier it was at 6.5 percent, but now it has been increased to 7.5 percent. This means that RBI has reserved more capital to further strengthen its balance sheet. This step has been taken keeping in mind the possible future risks.

What will happen next?

If RBI has more than 7.5 percent 'equity', then the extra money can be transferred to the government. But if it is below the prescribed limit, then the government will not get any dividend until it regains the minimum capital level.