Source: LM
Context: The RBI may transfer a record ₹2.5 to ₹3 lakh crore as surplus to the government for FY 2024–25.
- The Central Board reviewed the Economic Capital Framework (ECF) on May 15, 2025, ahead of deciding the transfer amount.
About RBI Surplus Transfer:
- What is Surplus Transfer?
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- The RBI transfers its net profit—i.e., total income minus expenditure—to the Central Government, after making necessary provisions.
- This process is termed as surplus transfer and not dividend payment, since RBI is not a commercial entity.
- Legal Framework:
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- Governed by Section 47 of the RBI Act, 1934.
- The Act mandates that, after making provisions for:
- Bad and doubtful debts,
- Depreciation in assets,
- Staff benefits and superannuation,
- And other routine banking contingencies, the remaining surplus must be transferred to the Government of India.
- Major Sources of RBI’s Income:
- RBI earns income primarily through:
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- Interest from foreign assets like bonds, treasury bills, and deposits with other central banks.
- Interest on domestic securities, mainly government bonds.
- Short-term lending to banks (e.g., repo operations).
- Commission for managing borrowings of Central and State governments.
- Service charges for managing the currency and payment systems.
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- Key Expenditures of RBI:
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- Printing of currency notes.
- Staff salaries and retirement benefits.
- Commission to banks and primary dealers involved in public debt transactions.
- How is the RBI Surplus Transfer Amount Decided?
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- Based on Economic Capital Framework (ECF): Adopted on August 26, 2019, following the recommendations of the Bimal Jalan Committee.
- Contingent Risk Buffer (CRB) Range: Risk provisioning is maintained within 5.5%–6.5% of the RBI’s balance sheet.
- Surplus = Income – Expenditure – Risk Provisions: After accounting for operational expenses and CRB provisioning, the remaining balance is the transferable surplus.
- Approved by RBI Central Board: Final decision taken in the Board meeting post financial year-end (July–June).
