On Friday the RBI’s Central Board sanctioned the transfer of ₹99,122 crores as surplus to the Central government for the accounting period of nine months ended March 31, 2021. This is 73.50% higher as compared to the ₹57,128 crore transfer allowed in the accounting year 2019-20.

This transfer of higher surplus comes as the government steps up the expenditure for healthcare and social sector schemes in the wake of the Covid-19 pandemic boosting its capacity to spend. RBI in a statement said that the Board had examined the current economic situation, global and domestic challenges, and recent policy measures, taken by the RBI to alleviate the adverse impact of the second wave of Covid-19 on the economy. The Board, on its 589th meeting on Friday, decided to maintain the Contingency Risk Buffer at 5.50%. To this Rahul Bajoria, Chief India Economist, Barclays Securities (India) Pvt Ltd, and Shreya Sodhani, Research Analyst, Barclays Investment Bank, Singapore said that according to their projections, they had factored in a dividend of ₹65,000 crores from the RBI, while the government’s budget estimates include ₹45,000 crores from the Central bank. A higher-than-expected dividend from the RBI provides the financially strained government with room to provide more relief measures for alleviating the impact of the second Covid-19 wave.

They observed that the upside surprise could have been inspired by the increased returns from domestic assets and changes in accounting practices by the RBI; the RBI recently allowed itself to book profits on its foreign exchange transactions from a weighted average cost perspective. With the change in the Reserve Bank’s accounting year to April-March, the Board reviewed the working of the RBI during the transition period of nine months and approved the Annual Report and Accounts of the Reserve Bank for the transition period.