Bimal Jalan Committee Recommendations on RBI Dividend Transfer 'Stand the Test of Time'

The RBI's dividend transfer to the government based on the Bimal Jalan committee's recommendations has "stood the test of time" and may only require some tweaks for the next five years. The source said that at a time of steady economic growth, some alteration in the dividend transfer formula may be required to suggest a set formula for the coming years. The RBI gives dividend to the government on the basis of its Economic Capital Framework, which was adopted in August 2019 based on the Bimal Jalan-led Expert Committee report.

The Reserve Bank of India (RBI) is set to announce its dividend transfer for the 2024-25 fiscal year to the government, with analysts predicting it could exceed the budgeted amount of Rs 2.56 lakh crore. The announcement is expected to come after the RBI's Central Board of Directors meeting scheduled for Friday, May 23, 2025 [2].

The current dividend transfer formula, based on the Bimal Jalan committee's recommendations, has proven effective, even during the COVID-19 pandemic. However, a government source has indicated that some alterations may be required for the coming five years, as the economy continues to grow steadily [1].

The RBI gives dividends to the government based on its Economic Capital Framework (ECF), which was adopted in August 2019 based on the Bimal Jalan-led Expert Committee report. The committee had suggested maintaining the Contingent Risk Buffer (CRB) between 5.5 to 6.5 per cent of the RBI's balance sheet [1].

Last week, the RBI board reviewed the ECF, which serves as the basis for determining the surplus transfer to the government. The board is expected to seek the government's approval to expand the range of the CRB, which could impact the transferable surplus [5].

In the 2023-24 fiscal year, the RBI transferred a record Rs 2.1 lakh crore to the government, more than double the Rs 87,416 crore transferred in 2022-23 [2]. The Union Budget for the current fiscal has projected a dividend income of Rs 2.56 lakh crore from the Reserve Bank and public sector financial institutions [2].

References:

[1] https://m.economictimes.com/news/economy/finance/rbi-dividend-jalan-panel-recommendations-stood-test-of-time-may-only-need-some-tweaks/articleshow/121362343.cms
[2] https://cfo.economictimes.indiatimes.com/news/policy/rbi-likely-to-announce-dividend-for-centre-today/121358065
[5] https://www.business-standard.com/finance/news/rbi-seeks-govt-nod-for-bigger-contingent-risk-buffer-band-after-ecf-review-125051800702_1.html