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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.”