RBI’s FY25 Dividend to Government Likely to Surge 50% Over Last Year, May Touch Rs. 3 Lakh Crore
The Reserve Bank of India (RBI) is likely to pay a significantly higher dividend to the central government for the 2024-25 financial year, with new estimates putting the figure at around Rs. 3 lakh crore. This will be a 50% increase from the Rs. 2.1 lakh crore that was paid last financial year.
Previous estimates had also estimated FY25 dividend between Rs. 2 lakh crore and Rs. 2.5 lakh crore, based on a mid-April survey of ten institutions. Only one of them had estimated a higher amount of Rs. 3.25 lakh crore. The government had in its Union Budget provided for a dividend receipt of Rs. 2.3 lakh crore.
The updated, higher projections are being fueled by more robust earnings from foreign exchange operations, better interest income, and government securities’ market-to-market (MTM) gains. The RBI has profited from investing its foreign exchange reserves during periods of higher US treasury yields, while it has also earned substantial commissions from its forex business and rising interest income from government securities.
Gross dollar sales by the RBI jumped to $371.6 billion during FY25 (up to February), from $153 billion in FY24. The RBI sold huge quantities of foreign exchange to control currency volatility and maintain exchange rate stability and was the largest seller among Asian central banks in January. Ever since the foreign exchange reserves reached their peak at $704 billion in September 2024, the RBI must have sold more than $125 billion.
The rupee securities held by the central bank rose by Rs. 1.95 lakh crore to Rs. 15.6 lakh crore as of March 2025. The fall in government securities (GSec) yields has led to MTM gains on these holdings.
Besides forex earnings, the RBI also provided liquidity to banks during tight market conditions, further increasing its interest income. All these various revenue streams have put the RBI in a position to pay a much bigger dividend this year.
Contingency provisions for FY25 are likely to be the same as or more than last year, ranging from Rs. 40,000 crore to Rs. 80,000 crore. The provisions of last year were Rs. 42,800 crore. These are done as per the Economic Capital Framework (ECF) that was brought in August 2019, based on suggestions from the Bimal Jalan Committee. The framework requires the Contingent Risk Buffer (CRB) to be held between 6.5% and 5.5% of the RBI balance sheet.
The increased dividend payment would generate financial space ranging from 0.1% to 0.2% of GDP for the central government. This would assist in reducing the fiscal deficit, as well as provide more liquidity to the banking system, with the impact expected to be experienced by early July.
With the window of dividend announcement getting closer, the economists keep upping their projections as they highlight strong financial performances by the RBI and solid contribution from forex as well as domestic asset operations.
