RBI To Transfer 50,000cr Surplus To The Central Government
The Reserve Bank's income comprises of earnings from foreign and domestic sources, with the major portion being contributed by interest receipts, complemented by relatively small amounts of income from discount, exchange, commission, etc.
The Reserve Bank of India (RBI) on Wednesday said that it will transfer Rs 50,000 crore as surplus to the central government for the year ended June 30, 2018.
The Central Bank which follows the July-June year had transferred Rs 30,659 crore to the government’s coffers for the year ended June 30, 2017.
According to RBI, the decision to transfer the surplus was taken by its Central Board which met here on Wednesday.
The Reserve Bank’s income comprises of earnings from foreign and domestic sources, with the major portion being contributed by interest receipts, complemented by relatively small amounts of income from discount, exchange, commission, etc.
A strong inflow of foreign funds and benign oil prices have strengthened the Indian currency but what has worked best for the rupee is the fading impact of war hysteria. Experts now see a chance for the RBI to recoup the reserves it spent in 2018 defending the rupee.
Putting a number to this, Gurang Somaiya, currency analyst at Motilal Oswal, said: “It is possible that RBI may limit some of the appreciation and recoup some of its lost reserves… but it may only come if the rupee strengthens to around Rs 68.20 a dollar.”
Explaining the factors at play, Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, said: “Post-Abhinandan (shooting down of the IAF pilot), geopolitical risk has subsided which has boosted investor sentiments.”
Banerjee added that the gains of the rupee will help the Reserve Bank of India recoup reserves which it lost last year in a bid to arrest its fall.
“The rupee appreciated and closed at 70.14 for the last week on the back of strong flows and fading impact of war hysteria,” said Sajal Gupta, Head Forex and Rates, Edelweiss Securities.
In addition, Gupta said that some “big flows are lined up next week. Maybe Arcelor Mittal money can hit the Indian markets which can lead to some more appreciation towards 69.50 unless the RBI intervenes”.
However, the rising dollar index is causing nervousness and any breakout may lead to a reversal in the rupee’s trend, said Gupta. Somaiya said that RBI may choose not to intervene as the central bank’s prime aim was to arrest volatility.
“Yes the rupee is inching below the 70-a-dollar mark but then the (general) election can cause massive volatility. Also, it is seen that a lot of central banks are getting into a dovish stance owing to the fears of global slowdown.”
The RBI had to stop the slump in the rupee late last year after it touched an all-time high of 74.47 on October 11 following the rising crude oil prices.
The Brent Crude touched $86-a-barrel mark in early October but started to ease following the US decision to exempt 8 countries, including India and China, to continue buying oil for six months from Iran despite sanctions.
The decline in crude oil, which accounts for a large import bill for India, directly affects the exchange rates.
A major factor supporting the rupee is the strong prospect of better fund flows from abroad.
“Inflows into India have clearly turned positive since the end of January. The flows in February at Rs 17,720 crore is the highest since November 2017. The trigger for this inflows is the dovish statement that came from the Fed at the end of January,” said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
India’s foreign exchange reserves stood at $401.78 billion as against $393.13 billion in November last year. As the data suggests, with improving macros, the forex is already on the recovery path. (IANS)