The Reserve Bank of India (RBI) approved its highest-ever dividend of a staggering Rs 2.69 lakh crore to the PM Narendra Modi-led Central government for the financial year 2024-25. The dividend payout is a robust 27.4 per cent increase over the corresponding figure of Rs 2.1 lakh crore for the previous year.
The record dividend will help to keep the fiscal deficit in check while enabling the Finance Ministry to continue with its expenditure on big-ticket infrastructure projects to spur growth and social welfare schemes to uplift the poor in 2025-26.
The RBI has also increased its contingency risk buffer (CRB) to 7.5 per cent from 6.5 per cent earlier at the meeting of its Central Board held on Friday. The CRB helps cover potential hits like bad loans, falling asset values, or sudden economic shocks.
Economists had expected the RBI’s dividend to the government to surpass a record Rs 2.5 lakh this year as the central bank earnings, through the sale of dollars to prop up the rupee as it sharply depreciated during 2024-25, are reported to have shot up.
In September 2024, foreign exchange reserves peaked to $704 billion and the RBI is estimated to have sold over $125 billion since then, according to estimates by Nomura and DBS Bank. The previous record dividend transferred to the government stands at Rs 2.1 lakh crore during 2024-25. This was a record jump from the Rs 87,416 crore transferred to the government in 2023-24 for the profit made in 2022-23.
Among the RBI’s earnings, forex transactions are the most significant in light of the central bank’s measures to lower rupee volatility by strong dollar purchases earlier in fiscal 2025 and difference in the current versus historical exchange rate. Added to this are the interest income on government securities and earnings from funds extended to banks in the midst of previous tight liquidity.
Earnings on forex transactions were substantial with gross dollar sales tracking at $371.6 billion in fiscal 2025 till February compared to $153 billion in fiscal 2024, according to IDFC First bank’s Chief Economist Gaura Sengupta.
The higher dividend creates fiscal space of 0.1 per cent to 0.2 per cent of GDP, estimates Sengupta. With support from the higher-than-budgeted RBI surplus and savings on a few expenditure heads, the Central government is in a fairly strong position to counter the growth slowdown risks and any potential emergency spending requirements.
Apart from helping to lower the fiscal deficit, the RBI dividend will be a significant infusion to core liquidity in the banking system during the current financial year. This will help to keep interest rates low and allow banks to extend more loans to corporates and consumers to accelerate economic growth and create more jobs.
