India: RBI transferred $24.4bn to government – TD Securities

Analysts at TD Securities note that the transfer of INR 1.76 trillion ($24.4bn) by the RBI to the Indian government was higher than the budgeted amount of INR 900bn and is a timely capital injection for the government.

Key Quotes

“Distribution of the RBI’s excess reserves has been a major issue, with a panel set up in December to recommend distributions. In the end the RBI board accepted the panel’s recommendations.”

“Given worries about weak tax revenues this will allay concerns about how the government will be able to finance the planned INR 700bn infusion into state-run banks and is likely positive for bonds. It’s also positive that the dividend will be given in one payment rather than in staggered amounts.”

“After the transfer to the government realized equity will be a still healthy 5.5% of the RBI's balance sheet, which is at the bottom end of the committees recommended 5.5-6.5% range.”