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rbi: Interest Paid To Banks Cuts Down Rbi Surplus | Mumbai News

Mumbai: There have been multiple factors driving down the RBI’s surplus this year. A major cost for RBI was the interest that is paid to banks on money that they parked with it under the liquidity adjustment facility. The central bank has been paying thousands of crores to banks after impounding the surplus liquidity it had pumped into banks in the wake of the Covid pandemic.
RBI has also taken a hit on its foreign investment as the value of debt securities fell due to the rise in interest rates. It has also had to spend over $40 billion of its reserves to stem volatility in the market and will need to set aside more money to replenish reserves. “The board approved the transfer of Rs 30,307 crore as surplus to the central government for the accounting year 2021-22 while deciding to maintain the Contingency Risk Buffer at 5.50%,” RBI said.
“For the year, the government is targeting around Rs 74,000 crore as dividend from RBI, public sector banks and other financial institutions. This will mean that a large part of the profit of PSBs and FIs will have to be transferred to make good this number or else there will be a slippage,” said Madan Sabnavis, chief economist, Bank of Baroda.
Last year’s dividend of Rs 99,122 crore was higher than expected as it was for only nine months (July 2020 to March 2021). Earlier, RBI had a July-June accounting year.

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