The Reserve Bank of India’s bumper dividend of about ₹2.7 lakh crore will ease the fiscal position of the government and help bolster growth in the world’s fourth-largest economy, economists at SBI said in a report.Finance Minister Nirmala Sitharaman in her Budget for 2025-26 projected a dividend income of ₹2.56 lakh crore cumulatively from the RBI and public sector financial institutions.
With the RBI’s transfer, this number would now be much higher than the budgeted estimates.
“We expect the fiscal deficit to ease by 20 basis points from the budgeted level to 4.2% of GDP. Alternatively, it will open up for additional spending for around ₹70,000 crores, other things remaining unchanged,” according to the latest edition of SBI Research’s Ecowrap.RBI announced a record ₹2.69 lakh crore dividend for the financial year 2024-25 (April 2024 to March 2024) compared with ₹2.11 lakh crore transferred in the previous FY24, an increase of 27.4%.This follows a change in the range of contingency risk buffers that the central bank can maintain to 6% +/- (plus or minus) 1.5%. The buffer was previously maintained between 5.5% and 6.5% (6.0% in FY23).”The (RBI) Board had recommended that the risk provisioning under the Contingent Risk Buffer (CRB) be maintained within a range of 7.5% to 4.5% of the RBI’s balance sheet,” it said.”This surplus payout is driven by robust gross dollar sales, higher foreign exchange gains, and steady increases in interest income. Notably, the RBI was the top seller of foreign exchange reserves in January among other Asian central banks,” the report said.In September 2024, foreign exchange reserves peaked to $704 billion and the RBI has sold “truck loads of dollar” to stabilise the currency, it said The dynamics of surplus for the RBI was decided by its LAF operations and interest income from its holding of domestic and foreign securities. The balances under the daily LAF show that RBI was in absorption mode from June 3 to December 13, 2024. “However, after mid-December, the system liquidity turned to injection mode till end-March 2025. The average absorptions add to RBI expenses under LAF,” it added.System liquidity turned to surplus mode and stands at ₹1.2 lakh crore on March 31, 2025. The average liquidity deficit from December 16, 2024, to March 28, 2025, was ₹1.7 lakh crore.Durable liquidity is likely to remain surplus in FY26, supported by several factors, like OMO purchase, RBI’s dividend transfer and BOP surplus of around $25-30 billion in FY26, according to the report.
Source link
