The government and stock and bond markets are ecstatic about the Reserve Bank of India's Rs 2.1 trillion dividend, but those who have been closely watching the bank's balance sheet and market activity aren't surprised by it.
RBI's Bond Holding
The RBI's substantial foreign currency holdings have provided the majority of its revenue. These are primarily held as US Treasury bonds, and smaller amount bonds, held as Euro, Swiss, and Yen bonds.
Currently, the US Federal Reserve's average fund rate for FY23 was approximately 2.5 per cent , whereas the rate for FY24 was 5 per cent. Therefore, there's a good chance that the central bank made at least 2 percentage points more on all of its foreign bond holdings in FY24 than it did in FY23.
Forex Holding
The sale of dollars is probably going to be a significant source of income. Based on its data, the RBI grossly sold USD 153 billion in FY24. (Despite the fact that its reserves increased by USD 61 billion in FY24, RBI's net bought` more.). The average price of all previous dollar purchases is now used by the RBI to determine the purchase price of the dollars it sells.
The historical price, according to reports, is likely between Rs 75 and Rs 76 per dollar. However, the selling price per dollar would have been at least Rs. 83 Thus, for every dollar sold, the central bank most likely made Rs 8 in profit. The RBI most likely made Rs. 1.2 trillion in revenue from a sale of USD 153 billion in FY24.
The RBI data indicates that its gold holdings increased by approximately Rs. 63,500 crore in FY24, coinciding with the peak prices of gold.
Based on a rough calculation, the Reserve Bank of India (RBI) earned Rs 3 trillion to Rs. 3.2 trillion from selling foreign currency, taking into account interest from holdings in foreign bonds and the revaluation of gold reserves. However, because it was absorbing money for 259 of the 365 days in FY24, the RBI would have lost some revenue from its domestic market operations.
Net-net A conservative estimate puts the surplus the RBI would have made in FY24 between Rs 3.5 trillion and at least Rs 3 trillion. This helps to explain the substantial Rs 2.1 trillion dividend, which was sufficient to increase the contingent risk buffer from 6 per cent to 6.5 per cent.
