During the year, the central bank saw a 50% jump in gains from foreign exchange transactions, which allowed it to transfer a larger-than-budgeted dividend of ₹87,416 crore to the government. The gains from foreign exchange transactions stood at ₹1.03 lakh crore at the end of financial year 2023.

The forex gains were on record currency sales of $213 billion, more than twice what the central bank sold in fiscal 2022. RBI’s foreign currency sales, which more than doubled from the previous fiscal year in gross terms, are a crucial source of income for the central bank as it generates a profit on these sales.

RBI sold a lot of dollars in FY23 as it tried to bring down volatility in the rupee exchange rate following the turmoil that roiled global financial markets after Russia invaded Ukraine in February 2022. RBI’s balance sheet increased by 2.5% to ₹63.45 lakh crore in FY23, up from ₹61.9 lakh crore in FY22. Besides the ₹87,416 crore transferred to the government, RBI also transferred ₹1.3 lakh crore to its contingency risk buffer.

A contingency buffer is a specific provision meant for meeting unexpected and unforeseen contingencies, including depreciation in the value of securities, risks arising out of monetary and exchange rate policy operations and systemic risks. The contingency buffer stood at 6% of the balance sheet, an increase from 5.5% in the previous year.

According to Normura research, the higher RBI dividend is a fiscal windfall of over ₹50,000 crore or 0.17% of the GDP for the government, but it is likely to be neutralized by an equal amount of slippage on the fertilizer subsidy.