Key Highlights

• RBI to transfer ₹2.70 lakh crore as dividend to the central government for FY25 – highest ever in history.

• 27.4% increase over last year’s ₹2.1 lakh crore dividend.

• Strengthens government’s fiscal position ahead of Budget 2024 and a potential new administration.

• Boosted by foreign exchange income, dollar sales, and higher interest on global assets.

• RBI also raises its Contingent Risk Buffer (CRB) from 6.5% to 7.5%.

In a landmark move, the Reserve Bank of India (RBI) has announced a record-breaking dividend transfer of ₹2.70 lakh crore to the central government for FY25. This is the highest surplus ever remitted by India’s central bank surpassing last year’s already impressive ₹2.10 lakh crore and comes at a critical juncture as the nation gears up for Budget 2024 and a possible change in administration.

The RBI’s dividend bonanza is powered by soaring foreign exchange earnings, heavy dollar sales, and robust interest income on global assets. At the same time, the central bank has raised its Contingent Risk Buffer (CRB) from 6.5% to 7.5%, demonstrating prudence amid global uncertainties while still ensuring a record payout.

Why This Record Dividend Matters

1. Lifeline for Government Finances

This ₹2.70 lakh crore transfer comes as a major fiscal boost, helping the government keep its FY25 fiscal deficit target of 4.4% of GDP within reach. The surplus reduces the need for excessive borrowing, creates room for higher infrastructure spending, and provides financial cushioning at a time when election-related disruptions may impact revenue collection.

2. What Drove the RBI’s Windfall?

The dividend is largely the result of a multi-fold increase in RBI’s earnings:

• Foreign exchange profits: Heavy dollar sales (~$399 billion in FY25 vs. ~$153 billion in FY24).

• Higher global yields: RBI earned more interest on its foreign reserves.

• Lower provisioning needs: Despite increasing its risk buffer, RBI had headroom to remit surplus due to overall balance sheet strength.

This performance underscores how effectively the RBI has navigated a volatile global economic landscape.

Government’s Game Plan for the Windfall

This unexpected fiscal space gives the government flexibility in multiple areas:

• Step up capital expenditure in infrastructure sectors like roads, railways, and rural development.

• Offset shortfalls in tax or disinvestment receipts.

• Sustain subsidies and welfare schemes even in a politically sensitive year.

It could also help maintain investor confidence in the bond market by signaling lower-than-expected borrowing.

RBI Dividend: A Three-Year Snapshot

This dramatic rise reflects not only RBI’s tactical handling of global financial markets but also the strength of India's external sector position.

Conclusion: A Fiscal Game-Changer

The RBI’s record dividend is more than just a number it’s a strategic asset for fiscal planning. It gives the next government a head start with a stronger balance sheet, opens space for infrastructure-led growth, and potentially supports faster fiscal consolidation. For markets and policymakers alike, this move has reset expectations and the Budget math for FY25.

Sources

1. The Economic Times

2. The Indian Express

3. Mint

4. Moneycontrol