Nifty Bank Soars 700 Pts On RBI's Rs 2.11 Tn Dividend To Central Govt
SBI report says, dividend is estimated to ease fiscal deficit by 30 to 40 bps from the budgeted level of 5.1 per cent of GDP for FY25
The Nifty Bank index soared more than 700 points in the Thursday trading session on the back of a more than Rs 2 trillion dividend to the central bank by the Reserve Bank of India.
The Nifty Bank which has a market capitalisation of more than Rs 39 trillion, rallied 709 points or 1.51 per cent in the afternoon session.
In the twelve-stocks index, Axis Bank and Bank of Baroda surged more than 3 per cent followed by more than 2 per cent gains in AU Bank and IndusInd Bank. SBI, ICICI Bank, Bandhan Bank, PNB and IDFC First Bank also traded more than 1 per cent higher.
The State Bank of India (SBI) report stated that following the RBI’s declaration of a record dividend of Rs 2.11 lakh crore to the central government for the financial year 2023-24, a substantial reduction in the fiscal deficit is on the horizon. The fiscal deficit of the government can be reduced by 30 to 40 basis points (bps) from the budgeted level of 5.1 per cent of GDP.
"The declaration of a record dividend by the RBI today was well received by the financial markets, the benchmark yields softening to sub-7 per cent in testimony to the highest ever surplus transfer that is estimated to ease fiscal deficit by 30 to 40 bps from the budgeted level of 5.1 per cent of GDP for FY25 as was set in Interim Budget," said the report.
The chairman of Mahindra Group, Anand Mahindra also attended the RBI meeting to approve the dividends and he informed in a social media post that the dividend transfer to the government has been approved after increasing the contingency risk buffer to 6.5 per cent from 6 per cent.
The RBI's income was Rs 1.6 lakh crore in FY22 and Rs 2.35 lakh crore in FY23. The SBI report projects that for FY24 the RBI income will be around Rs 3.75 to 4 lakh crore.
The report says that a nearly 60 to 70 per cent YoY increase in RBI's income is expected to be from Interest Income from foreign securities as well as exchange gain from foreign exchange transactions.
The RBI said that the surplus transfer to the government for the financial year 2023-24 is based on the Economic Capital Framework (ECF) adopted by the RBI on 26 August 2019, as per recommendations of the Bimal Jalan committee.
