RBI Flashcards
RBI’s State of the Economy Report
Key Points:
i.Headline inflation, measured by Year-on-Year (Y-o-Y) changes in the all-India Consumer Price Index
(CPI), moderated to 4.8% in April 2024 from 4.9% in March.
ii.Food inflation increased to 7.9% in April 2024 from 7.7% in March 2024, with prices of various food
items likely to maintain headline inflation around 5%.
iii.The RBI projects CPI inflation of 4.5% in FY25, with quarterly projections as follows: Q1: 4.9%, Q2:
3.8%, Q3: 4.6%, and Q4: 4.5%.
iv.Rural inflation in April 2024 stood at 5.43%, surpassing urban inflation.
Net FDI declines by 62% to USD 10.5 billion in FY24
As per the report, Net Foreign Direct Investment (FDI) into India dropped by 62.17% to USD 10.58
billion in FY24, the lowest since 2007, from USD 27.98 billion In FY23. This decline was primarily due to
increased capital repatriation and Indian investments abroad.
Key Points:
i.Out of the USD 70.9 billion gross FDI flows in FY24,
USD 44.4 billion was repatriated through dividends, share
sale, or disinvestment, while USD 15.96 billion was
invested overseas by Indians.
* In FY23, gross FDI flows were USD 71.3 billion.
ii.Over 60% of FDI equity flows targeted manufacturing,
electricity, computer services, financial services, retail,
and wholesale trade.
iii.More than 80% of FDI flows came from Singapore,
Mauritius, the United States of America(USA), the
Netherlands, Japan, and the United Arab Emirates (UAE).
iv.Global FDI flows have been affected by higher
borrowing costs, geopolitical fragmentation, and rising
protectionism in recent years.
* Despite these challenges, India is expected to
be among the top 10 economies with high FDI momentum in 2024.
Outward remittances under LRS hit new high of USD 31.73 bn
Outward remittances under India’s Liberalized Remittance Scheme (LRS) hit a record high of USD 31.73
billion in FY24, marking a 16.91% increase Y-o-Y from FY23’s USD 27.14 billion.
* The growth was driven by robust international travel spending, reaching USD 17 billion in
FY24, a 24.84% rise from the previous year.
* Other significant uses of remittances included maintenance of close relatives (USD 4.61
billion) and funding overseas education (USD 3.58 billion).
* In March 2024, overall outward remittances amounted to USD 2.30 billion, down by 22.13%
compared to March 2023.
NRI deposit flows up 63.5% to USD 14.7 bn in FY24, the highest in 8 years
Non Resident Indian (NRI) deposit flows surged by 63.5% to USD 14.7 billion in FY24, the highest in 8
years. The earlier high was USD 15.97 billion in FY16. The majority of the increase went into Foreign
Currency Non-Resident (FCNR) accounts, totaling USD 6.37 billion in FY24 compared to USD 2.44 billion in
FY23.
Key Points:
i.Outstanding NRI deposits reached USD 151.87 billion by March 2024, up from USD 138.87 billion in
March 2023.
ii.FCNR deposits rose to USD 25.73 billion in March 2024, compared to USD 19.36 billion in March 2023.
iii. Non-Resident External (NRE) deposits stood at USD 98.62 billion in March 2024, and Non-Resident
Ordinary (NRO) deposits reached USD 27.52 billion by March 2024.
RBI Board Approves Dividend
RBI Board Approves Dividend of Rs 2,10,874 Crore to Central Government for FY24
On 22nd May 2024, the Central Board of Directors of Reserve Bank of India (RBI) approved the transfer
of Rs 2,10,874 crore (~Rs 2.11 Lakh crore) as surplus to the Central government for the fiscal year 2023-
24 (FY24). This is around 141% higher than surplus transferred in FY23 (Rs 87,416 crore.).
* This is above the budgeted figure of Rs 1.50 lakh crore in the Interim Budget for FY2025 under
dividends and profits, which includes dividends from Public Sector Undertaking (PSUs).
Note: This decision was taken during the 608th meeting of the Central Board of Directors of RBI held at
Mumbai, Maharashtra under the Chairmanship of Shaktikanta Das, Governor of RBI.
How is this surplus arrived?
i.The surplus transfer for FY24 is determined by the Economic Capital Framework (ECF) adopted by
RBI, based on recommendations from the Expert Committee chaired by Dr. Bimal Jalan.
ii.The committee suggested maintaining the Contingent Risk Buffer (CRB) within a range of 6.5 to 5.5%
of the RBI’s balance sheet. Despite challenges posed by the
Covid-19 pandemic during accounting years 2018-19 to
2021-22, the CRB was maintained at 5.50%.
* With economic growth rebounding in FY 2022-
23, the CRB was raised to 6.00%, further
increased to 6.50% for FY 2023-24, reflecting
the economy’s resilience.
* Consequently, the RBI board approved the
above transfer.
iii.Other reason for this surplus income includes a
notable rise in interest earnings from RBI’s foreign
exchange assets, influenced by US Federal Reserve’s
aggressive interest rate hikes.
Key Points:
i.RBI transfers surplus income to the central government
annually, generated from investments, fluctuations in valuation of dollar reserves, and revenue from
currency printing fees.
ii.Higher dividend aids Central Government in achieving fiscal deficit target of 5.1% of Gross Domestic
Product (GDP) for FY25 and provides greater spending capacity for the government.
iii.Increased CRB ensures RBI’s capability to handle unforeseen situations arising from depreciation of securities or monetary/exchange rate policy risks.
Key Participants:
Deputy Governors Swaminathan Jankiraman, Michael Debabrata Patra, M Rajeshwar Rao and T Rabi
Sankar; Ajay Seth, Secretary, Department of Economic Affairs (DEA), and Dr. Vivek Joshi, Secretary,
Department of Financial Services (DFS), Ministry of Finance.
RBI Surplus Transfer:
RBI transfers the surplus to the government after making provisions for reserves and retained earnings.
RBI transfers the surplus, in accordance with Section 47 (Allocation of Surplus Profits) of the RBI Act,
1934.
Recent Related News:
i.According to the article titled “India @ 100” published in Reserve Bank of India (RBI) Bulletin July
2023 published by RBI’s Economic Research Department, India needs to achieve an average annual real
GDP growth rate of 7.6% over the next 25 years to become a developed nation by 2047-48.
ii.RBI released a notification addressing all the banks regarding the inclusion of ‘NongHyup Bank’ in the
Second Schedule to the RBI Act, 1934.
About Reserve Bank of India (RBI):
i.It was established on April 1, 1935, in accordance with the provisions of the Reserve Bank of India Act,
1934.
ii.The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved
to Mumbai in 1937.
iii.Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned
by the Government of India.
iv.Thus, 2023 marked the 75th year of public ownership of RBI and its emergence as a national institution.
