BS EDIT: RBI’s Record Surplus: Boosting the Exchequer, Balancing Risks

Record Surplus, Timely Support

The RBI will transfer ₹2.69 trillion to the Centre — the highest ever

🟢 Above Budget Estimate (₹2.56 trillion)

🔵 Below market expectation (~₹3.5 trillion)

Fiscal and Liquidity Gains

✔ Eases pressure on fiscal-deficit target (4.4% of GDP)

✔ Creates room for higher defence spending

✔ Improves liquidity for smoother rate transmission

Why the Surplus Rose

📈 Higher interest income from global rate hikes

💱 Gains from forex sales (~$400 billion gross)

⚠ But future forex gains may be limited as average acquisition costs rise

Risk Buffer Range Revised

RBI expands risk buffer range:

🆕 4.5%–7.5% of balance sheet (was 5.5%–6.5%)

🧩 Held at upper end for FY25 — prudent amid global uncertainty

Market Expectations vs RBI Prudence

Surplus transfer fell short of market hopes

Why?

📌 RBI prioritised long-term resilience over short-term fiscal aid

📌 Without raising buffer, transfer could have hit ₹3.5 trillion

Forex Market Interventions Need Caution

Excessive RBI forex intervention may:

❌ Encourage risky external borrowing

❌ Weaken private hedging behaviour

✅ RBI should intervene only to curb volatility — not distort markets