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Indian Express
03-06-2025
- Business
- Indian Express
RBI's surplus transfer to govt: All you need to know for UPSC Exam
Take a look at the essential events, concepts, terms, quotes, or phenomena every day and brush up your knowledge. Here's your knowledge nugget for today on RBI's surplus transfer to govt. (Relevance: Every aspect of the RBI, from its origin, structure, and key functions to its evolving policies, holds importance for UPSC CSE. Previously, several questions have been asked on this topic. This year's UPSC Prelims also had a question on the RBI's functions, which presents the RBI is an evergreen topic in the economy section that aspirants must prepare comprehensively.) The Board of the Reserve Bank of India (RBI) on May 23 approved a record surplus transfer, or dividend, of Rs 2.69 lakh crore to the Central Government for the accounting year 2024-25. It followed a meeting of the central board of directors of the RBI on May 15. The board reviewed the Economic Capital Framework (ECF), which is used to determine risk provisioning and surplus distribution by the central bank to the government. In 2023-24, the RBI had transferred the surplus of Rs 2.11 lakh crore. Unlike the banks it regulates, the RBI isn't a company that announces a dividend. In this context, it becomes essential to understand that how does the transfer of RBI's surplus work out and what are the functions of RBI. 1. The RBI as a central bank is not only mandated to keep inflation or prices in check through monetary policy, but it is also supposed to manage the borrowings of the Government of India and state governments; supervise or regulate banks and non-banking finance companies; and manage the currency and payment systems. 2. While carrying out these functions or operations, the RBI registers profits. Generally, the central bank's income comes from the: (i) Returns earned on its foreign currency assets, which could be in the form of bonds and treasury bills of other central banks or top-rated securities, and deposits with other central banks. (ii) Interest on its holdings of local rupee-denominated government bonds or securities, and while lending to banks for very short tenures, such as overnight. (ii) It claims a management commission on handling the borrowings of state governments and the central government. 4. Its expenditure is mainly on the printing of currency notes and staff, besides the commission it gives to banks for undertaking transactions on behalf of the government across the country, and to primary dealers, including banks, for underwriting some of these borrowings. 1. The RBI isn't a commercial organisation like the banks or other companies that are owned or controlled by the government – it does not, as such, pay a 'dividend' to the owner out of the profits it generates. 2. Although the RBI was promoted as a private shareholders' bank in 1935 with a paid-up capital of Rs 5 crore, the government nationalised it in January 1949, making the sovereign its 'owner'. 3. What the central bank does, therefore, is transfer the 'surplus' – that is, the excess of income over expenditure – to the government, in accordance with Section 47 (Allocation of Surplus Profits) of the Reserve Bank of India Act, 1934: After making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation fund [and for all other matters for which] provision is to be made by or under this Act or which are usually provided for by bankers, the balance, of the profits shall be paid to the Central Government. 4. The Central Board of the RBI does this in early August, after the July-June accounting year is over. 1. In 2013, a technical committee of the RBI Board, headed by Y. H. Malegam, reviewed the adequacy of reserves and a surplus distribution policy and recommended a higher transfer to the government. 2. Earlier, the RBI transferred part of the surplus to the Contingency Fund, to meet unexpected and unforeseen contingencies, and to the Asset Development Fund, to meet internal capital expenditure and investments in its subsidiaries, in keeping with the recommendation of a committee to build contingency reserves of 12% of its balance sheet. 7. But after the Malegam committee made its recommendation, in 2013-14, the RBI's transfer of surplus to the government as a percentage of gross income (less expenditure) shot up to 99.99% from 53.40% in 2012-13. 1. Under Section 45ZB of the amended RBI Act, 1934, the central government is empowered to constitute a six-member Monetary Policy Committee to determine the policy interest rate required to achieve the inflation target. The first such MPC was constituted on September 29, 2016. 2. Section 45ZB lays down that 'the Monetary Policy Committee shall determine the Policy Rate required to achieve the inflation target', and that 'the decision of the Monetary Policy Committee shall be binding on the Bank'. 3. The MPC fixes the benchmark interest rate — or the base or reference rate that is used to set other interest rates — in India. The primary objective of the RBI's monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth. 4. Section 45ZB says the MPC shall consist of the RBI Governor as its ex officio chairperson, the Deputy Governor in charge of monetary policy, an officer of the Bank to be nominated by the Central Board and three persons to be appointed by the central government. The last category of appointments must be from 'persons of ability, integrity, and standing, having knowledge and experience in the field of economics or banking or finance or monetary policy'. (Section 45ZC) 5. Notably, each member of the MPC has one vote, and in the event of an equality of votes, the Governor has a second or casting vote. (1) Which of the following are the sources of income for the Reserve Bank of India? (UPSC CSE 2025) I. Buying and selling Government bonds II. Buying and selling foreign currency III. Pension fund management IV. Lending to private companies V. Printing and distributing currency notes Select the correct answer using the code given below. (a) I and II only (b) II, III and IV (c) I, III, IV and V (d), II and V (2) With reference to the Monetary Policy Committee (MPC), which of the statements given below is/are correct? 1. The MPC is required to meet at least four times in a year. 2. It determines the policy repo rate required to achieve the inflation target. 3. There is no quorum for the MPC meeting. 4. It is an eight-member committee fully constituted by the Reserve Bank of India. Select the correct answer using the codes given below: (a) 1, 2 and 3 (b) 3 and 4 only (c) 1 and 2 only (d) 2 and 4 only (Sources: RBI approves record transfer 'surplus' to govt: Why does this transfer happen, and how?) Subscribe to our UPSC newsletter. Stay updated with the latest UPSC articles by joining our Telegram channel – Indian Express UPSC Hub, and follow us on Instagram and X. 🚨 Click Here to read the UPSC Essentials magazine for May 2025. Share your views and suggestions in the comment box or at
Time of India
29-05-2025
- Business
- Time of India
RBI posted Rs 3.38 lakh cr income on strong foreign asset returns, forex sales
MUMBAI:RBI's income rose 23% to Rs 3.38 lakh crore in FY25, driven by gains from foreign currency assets and dollar sales in the local market. This helped the central bank transfer a record Rs 2.7 lakh crore to the Govt, up from Rs 2.1 lakh crore in FY24. RBI's balance sheet grew 8.2% to Rs 76 lakh crore in FY25 from Rs 70 lakh crore in FY24. One of the drivers of the rise in assets, was higher gold holdings, as global uncertainty boosted safe-haven demand. The rest came from a larger domestic investment portfolio, supported by OMO purchases for managing liquidity. Overall interest income rose by 12% to Rs 2.11 lakh crore, while gains from foreign exchange transactions contributed to a 47% jump in other income, which stood at Rs 1.28 lakh crore. The RBI's total income for the year increased by 23% to Rs 3.38 lakh crore, mainly driven by a 29% rise in interest earnings from overseas assets to Rs 1.33 lakh crore. However, part of the money was used by the RBI to strengthen its financial buffers. The Contingency Fund rose by 27% to Rs 5.42 lakh crore, following a Rs 44,862 crore provision to align its Available Realised Equity (ARE) with the 7.5% target under the Economic Capital Framework. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 5 Books Warren Buffett Wants You to Read In 2025 Blinkist: Warren Buffett's Reading List Undo The ARE rose nearly 25% to Rs 5.72 lakh crore, while the Asset Development Fund remained unchanged at Rs 22,975 crore. Domestic earnings, however, declined. Interest income from local investments dropped nearly 10% to Rs 77,327 crore, largely due to lower returns from rupee securities. Other income from domestic operations fell by 20% to Rs 2,143 crore. Total expenditure went up by 8% to Rs 69,714 crore, mainly due to higher costs for printing currency and employee benefits. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Time of India
29-05-2025
- Business
- Time of India
29_Mum_MS_RBISURPLUS
Rbi reports increase in surplus transfer driven by foreign exchange gains in fy25 MUMBAI: Earnings from foreign exchange operations helped the Reserve Bank of India (RBI) report a 27% jump in its surplus transfer to the central govt for FY25, with revenue coming from both foreign currency assets as well as profits from the sale of dollars in the Indian markets. The surplus, also termed the available balance for transfer, rose to Rs 2.7 lakh crore in FY25 from Rs 2.1 lakh crore in FY24. Overall interest income rose by 12% to Rs 2.11 lakh crore, while gains from foreign exchange transactions contributed to a 47% jump in other income, which stood at Rs 1.28 lakh crore. The RBI's total income for the year increased by 23% to Rs 3.38 lakh crore, mainly driven by a 29% rise in interest earnings from overseas assets to Rs 1.33 lakh crore. However, part of the money was used by the RBI to strengthen its financial buffers. The Contingency Fund rose by 27% to Rs 5.42 lakh crore, following a Rs 44,862 crore provision to align its Available Realised Equity (ARE) with the 7.5% target under the Economic Capital Framework. The ARE rose nearly 25% to Rs 5.72 lakh crore, while the Asset Development Fund remained unchanged at Rs 22,975 crore. Domestic earnings, however, declined. Interest income from local investments dropped nearly 10% to Rs 77,327 crore, largely due to lower returns from rupee securities. Other income from domestic operations fell by 20% to Rs 2,143 crore. Total expenditure went up by 8% to Rs 69,714 crore, mainly due to higher costs for printing currency and employee benefits. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Indian Express
29-05-2025
- Business
- Indian Express
RBI's balance sheet expands 8.2% in 2024-25 on robust foreign earnings
Driven by strong income growth, particularly on account of robust earnings from foreign sources, the Reserve Bank of India's (RBI) balance sheet expanded by 8.2 per cent to Rs 76.25 lakh crore in the year 2024-25. The RBI's balance sheet stood at Rs 70.48 lakh crore as on March 31, 2024. The balance sheet of the RBI plays a critical role in the functioning of the country's economy, largely reflecting the activities carried out by the regulator, including the issuance of currency as well as monetary policy and reserve management. During 2024-25, its income grew by 22.77 per cent to Rs 3.38 lakh crore from Rs 2.76 lakh crore in 2023-24. The expenditure increased by 7.76 per cent to Rs 69,714.02 crore in 2024-25 from Rs 64,694.33 crore as on March 31, 2024, according to the RBI's annual report. The income from foreign sources surged 38.07 per cent to 2.59 lakh crore in 2024-25 from Rs 1.87 lakh crore in 2023-24. The rate of earnings on foreign currency assets was 5.31 per cent in the year 2024-25 as compared to 4.21 per cent in the previous year. The RBI's earnings from domestic sources declined 9.80 per cent from Rs 88,101.12 crore in 2023-24 to Rs 79,470.54 crore in 2024-25, mainly due to a decrease in interest on holding of rupee securities. The interest on holding of rupee securities, including oil bonds, dipped 7.63 per cent to Rs 85,524.67 crore. In the RBI's balance sheet, the increase on the assets side was due to a rise in gold, domestic investments and foreign investments by 52.09 per cent, 14.32 per cent and 1.7 per cent, respectively. On the liabilities side, expansion was due to an increase in notes issued, revaluation accounts, and other liabilities by 6.03 per cent, 17.32 per cent and 23.31 per cent, respectively. Domestic assets constituted 25.73 per cent while foreign currency assets, gold (including gold deposit and gold held in India) and loans and advances to financial institutions outside India constituted 74.27 per cent of total assets as on March 31, 2025 as against 23.31 per cent and 76.69 per cent, respectively, as on March 31, 2024. The total gold held by the RBI was 879.58 metric tonnes as on March 31, 2025, as compared to 822.1 metric tonnes as on March 31, 2024, reflecting an increase of 57.48 metric tonnes of gold during the year. The RBI's 'other liabilities' increased by 23.31 per cent from Rs 2.61 lakh crore as on March 31, 2024 to Rs 3.21 lakh crore as on March 31, 2025, primarily due to an increase in surplus payable to the Central Government. The RBI transferred Rs 2.69 lakh crore worth of surplus to the government for the year 2024-25, compared to Rs 2.11 lakh crore paid during 2023-24. As per the revised Economic Capital Framework (ECF), Contingent Risk Buffer (CRB) needs to be maintained in the range of 4.5-7.5 per cent of the size of the balance sheet. Last week, the RBI's central board approved that CRB may be maintained at 7.5 per cent of the size of the balance sheet of the Reserve Bank for the year 2024-25. Accordingly, a provision of Rs 44,861.7 crore was made and transferred to the contingency fund (CF) during 2024-25. The contingency fund is a specific provision meant for meeting unexpected and unforeseen contingencies, including depreciation in value of securities, risks arising out of monetary/exchange rate policy operations, systemic risks and any risk arising on account of special responsibilities enjoined upon the Reserve Bank. Table Income 3,38,308.09 2,75,572.32 22.77 Surplus transfer to government
Time of India
29-05-2025
- Business
- Time of India
RBI reports increase in surplus transfer driven by foreign exchange gains in FY25
MUMBAI: Earnings from foreign exchange operations helped the Reserve Bank of India ( RBI ) report a 27% jump in its surplus transfer to the central govt for FY25, with revenue coming from both foreign currency assets as well as profits from the sale of dollars in the Indian markets. The surplus, also termed the available balance for transfer, rose to Rs 2.7 lakh crore in FY25 from Rs 2.1 lakh crore in FY24. Overall interest income rose by 12% to Rs 2.11 lakh crore, while gains from foreign exchange transactions contributed to a 47% jump in other income, which stood at Rs 1.28 lakh crore. The RBI's total income for the year increased by 23% to Rs 3.38 lakh crore, mainly driven by a 29% rise in interest earnings from overseas assets to Rs 1.33 lakh crore. However, part of the money was used by the RBI to strengthen its financial buffers. The Contingency Fund rose by 27% to Rs 5.42 lakh crore, following a Rs 44,862 crore provision to align its Available Realised Equity (ARE) with the 7.5% target under the Economic Capital Framework. The ARE rose nearly 25% to Rs 5.72 lakh crore, while the Asset Development Fund remained unchanged at Rs 22,975 crore. Domestic earnings, however, declined. Interest income from local investments dropped nearly 10% to Rs 77,327 crore, largely due to lower returns from rupee securities. Other income from domestic operations fell by 20% to Rs 2,143 crore. Total expenditure went up by 8% to Rs 69,714 crore, mainly due to higher costs for printing currency and employee benefits. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
