New Delhi— The Reserve Bank of India’s (RBI) record-breaking dividend payout of ₹2.69 lakh crore to the central government has been driven by robust dollar sales, significant foreign exchange gains, and rising interest income, according to a report by SBI Research.
The report, published in SBI’s Ecowrap, highlights that the RBI was the largest seller of foreign exchange reserves among Asian central banks in January. The central bank took aggressive steps to stabilize the rupee, especially after India’s forex reserves peaked at $704 billion in September 2024, resulting in substantial dollar sales.
In a calculated move, the RBI also increased its risk buffer, otherwise known as the Contingent Risk Buffer (CRB), which limited the dividend transfer. “The dividend could have exceeded ₹3.5 lakh crore if not for the increase in the risk buffer,” the report noted.
The RBI’s Central Board, during its May 15 meeting, decided to raise the CRB to 7.5 percent of its balance sheet, up from 6.5 percent in FY24 and 6.0 percent in FY23. This decision followed the revised Economic Capital Framework (ECF), which guides how much surplus the RBI can transfer to the government.
The surplus was largely influenced by the central bank’s Liquidity Adjustment Facility (LAF) operations and interest earnings from domestic and foreign securities. Between June 3 and December 13, 2024, the RBI absorbed liquidity from the banking system, adding to its LAF expenses. After mid-December, the system shifted to liquidity injection mode through the end of March 2025.
The Union Budget for FY2025-26 had estimated ₹2.56 lakh crore in dividend income from the RBI and public financial institutions. With the RBI’s actual transfer now exceeding that target, fiscal projections are expected to improve.
SBI Research estimates that the fiscal deficit could now decline by 20 basis points to 4.2 percent of GDP. Alternatively, the government could choose to increase spending by an additional ₹70,000 crore, assuming other variables remain unchanged. (Source: IANS)
