Massive RBI Dividend of ₹2.7 Lakh Crore Could Limit Fiscal Deficit at 4.2% of GDP, According to SBI Analysis
Reserve Bank of India Announces Record Divider for FY2024-25
The Reserve Bank of India (RBI) has announced a proposed dividend of approximately Rs 2.69 lakh crore for the financial year 2024-25, representing a 27.4% increase compared to the previous financial year. This significant surplus is attributed to robust foreign exchange sales, higher foreign exchange gains, and increased interest income, as per a report by SBI Research's Ecowrap.
The increased dividend is expected to ease India's fiscal position and provide additional spending avenues for the government, amounting to around Rs 70,000 crores, according to the report. Finance Minister Nirmala Sitharaman had budgeted a total dividend income of Rs 2.56 lakh crore combined from the RBI and public sector financial institutions in her 2025-26 budget. With the RBI's transfer, dividend income is now poised to surpass the budgeted estimates.
The RBI Board has recommended that risk provisioning under the Contingent Risk Buffer (CRB) may be maintained between 7.5% and 4.5% of the RBI's balance sheet, a new range that allowed for the increased surplus payout. The change in the range of contingency risk buffers has enabled the RBI to bolster its reserves significantly.
The RBI was the top seller of foreign exchange reserves in January, among other Asian central banks. The dynamics of the surplus for the RBI were influenced by its LAF (Liquidity Adjustment Facility) operations and the interest income from its holding of domestic and foreign securities.
SBI Research's Ecowrap indicates that durable liquidity will remain surplus in FY26 due to factors like OMO (Open Market Operations) purchases, RBI's dividend transfer, and a BOP (Balance of Payments) surplus of approximately USD 25-30 billion in FY26.
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The increase in the proposed RBI dividend of Rs 2.69 lakh crore for the financial year 2024-25, subsequently surpassing the budgeted estimates, reflects positively on India's economic news. The additional spending avenues for the government due to this surplus might boost the overall business environment in India. The durable liquidity predicted to remain surplus in FY26, due to various factors such as OMO purchases and the RBI's dividend transfer, could potentially have a significant impact on India's finance sector.
