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RBI likely to pay out record dividend to government this year
/ 2 min read
This surplus amount from the central bank, which is expected to be decided soon, will be a cushion for the government, as fiscal pressures due to the West Asia war continue to rise.
Each year, the RBI pays the government a dividend from its profits, which serves as a financial boost for the government. | Credits: Narendra Bisht
The Reserve Bank of India is likely to pay out its highest ever dividend to the government this year, which would be a support for the government at a time when oil and fertiliser costs are emerging as a huge burden, due to the West Asia war. The uncertainty surrounding the trade negotiations with the US is a future concern.
For the year FY25, the RBI paid out a record dividend of ₹2.69 lakh crore to the central government, which was 27% higher than ₹2.11 lakh crore paid out the previous year.
Each year, the RBI pays the government a dividend from its profits, which serves as a financial boost for the government. But it is a statutory payment to be paid under Section 47 of the RBI Act, and it is not a goodwill gesture.
The surplus for any financial year is arrived at based on the revised Economic Capital Framework (ECF) as approved by the Central Board of the RBI.
But economists said it is still too early to assess the quantum as the RBI is likely to hold its board meeting later this month, where the amount will be decided upon.
Through the Budget papers, the government has budgeted a record ₹3.16 lakh crore in dividends and surplus transfers from the RBI, nationalised banks and financial institutions. The overall non-tax revenue is estimated at ₹6.66 lakh crore, to help keep the fiscal deficit under check.
“The problem will be if the RBI decides to increase its risk buffer and transfer less to the government,” an economist told Fortune India, on condition of anonymity. The buffer is usually maintained at between 5.5 to 6.5% of its balance sheet.
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