Reserve Bank of India Posts Record Dividend from Currency Gains

Reserve Bank of India Posts Record Dividend to Government

The Reserve Bank of India (RBI) has paid a record dividend to the government after experiencing higher interest income and significant gains from foreign exchange transactions, according to the central bank's annual report. The report, released on Friday, shows that the RBI transferred a record 2.87 trillion rupees ($30.1 billion) as dividend to the government, surpassing last year's dividend of 2.69 trillion rupees.

The RBI's earnings were boosted by a 11.81% increase in interest income to 2.36 trillion rupees in the financial year ended March. Interest earned on rupee bonds climbed 37.66% to 1.18 trillion rupees, while gains from foreign exchange transactions rose to 1.68 trillion rupees from 1.11 trillion rupees a year earlier. As a result, total income for the year increased by 26.4%.

However, the RBI's expenditure surged by 102.4%, leading to a significant expansion of the central bank's balance sheet. The balance sheet expanded by 20.6% year on year to 91.97 trillion rupees, highlighting the increased spending by the RBI.

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The RBI's balance sheet remains robust, with strong capital buffers and foreign exchange reserves, according to Gaura Sengupta, chief economist of IDFC First Bank Ltd. Nonetheless, the central bank's large net short dollar position, which reached a record $103 billion in March, somewhat constrains its ability to intervene in currency markets to stabilize the rupee.

The rupee fell about 10% in the last fiscal year, the worst performance among Asian currencies. In response, the RBI intervened in both spot and forwards markets to stem the slide.