RBI To Pay Rs 2.69 Lakh Crore Dividend To Government, Below Market Expectation
RBI announces record ₹2.69 lakh crore dividend to Centre for FY25, below market expectations due to higher risk buffer allocation.
By : Falaknaaz Syed
Update: 2025-05-23 15:29 GMT
Mumbai: The Reserve Bank of India (RBI) on Friday announced a dividend payout of record Rs 2.69 lakh crore to the government for the accounting year 2024-25, albeit lower than market expectations as the central bank raised the risk buffer or the country's fund to maintain financial stability based on its macroeconomic assessment.
The market was expecting the central bank to pay a dividend payout of Rs 2.8-3 lakh crore. The dividend amount for FY25 is 27.4 per cent higher compared to Rs 2.10 lakh crore announced in 2023-2024. The payout was Rs 87,416 crore for 2022-23.
Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India said, “In a prudent move, the RBI has increased the risk buffer, otherwise the dividend transfer could have topped Rs 3.5 lakh crore.”
“The Union Budget for 2025-26 had projected a dividend income of Rs 2.56 lakh crore cumulatively from the RBI and public sector financial institutions. With today’s transfer, this number would be now much higher than the budgeted estimates. We expect the fiscal deficit to ease by 20 basis points from the budgeted level to 4.2 per cent of GDP. Alternatively, it will open up for additional spending for around Rs 70,000 crore, other things remaining unchanged,” added Ghosh.
Murthy Nagarajan, head, fixed Income at Tata Asset Management said, “The RBI dividend of Rs. 2.69 lakh is lower than market expectation of Rs 3 lakh crore. This is due to RBI revising its contingent liquidity buffer to 4.5 to 7.5 percent. RBI board has increased its contingent reserve buffer to 7.5 percent, due to which this amount is lower than Rs 3 lakh crore which was the market expectation. This is a disappointment for the market, and we can expect some profit booking after the steep rally which we saw in the last 10 days.”
The central bank annually pays out a surplus to the government. This amount is determined after accounting for provisioning for bad loans, asset depreciation, employee benefits, and other statutory expenses under the RBI Act. The RBI dividend/surplus is an important source of revenue for the government especially as it provides a buffer to make up for a miss in taxes or disinvestment receipts, or higher-than-budgeted expenditure in the fiscal. It helps the government boost its fiscal position.
This surplus payout is driven by robust gross dollar sales, higher foreign exchange gains, and steady increase in interest income. Notably, the RBI was the top seller of foreign exchange reserves in January among other Asian central banks. In September 2024, foreign exchange reserves peaked to $704 billion and the RBI has sold truck loads of dollars to stabilize the currency. The dynamics of surplus for RBI was decided by its liquidity operations and interest income from its holding of domestic and foreign securities.
The RBI transfer to the government is governed by the revised Economic Capital Framework (ECF) approved by the Central Board in its 616th meeting held on May 15, 2025 under the chairmanship of RBI Governor Sanjay Malhotra. The revised framework stipulates that the risk provisioning under the Contingent Risk Buffer (CRB) be maintained within a range of 7.50 to 4.50 per cent of the RBI’s balance sheet. For FY25, the CRB has been increased to the upper limit of 7.5 per cent, reflecting improved macroeconomic stability and financial resilience. This transfer marks a sharp increase from the CRB levels
maintained during the pandemic years, when the buffer was kept at 5.5 per cent to support growth. The CRB was gradually raised to 6 per cent in FY23 and to 6.5 per cent in FY24 before this year’s upward revision.
Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India said, “In a prudent move, the RBI has increased the risk buffer, otherwise the dividend transfer could have topped Rs 3.5 lakh crore.”
“The Union Budget for 2025-26 had projected a dividend income of Rs 2.56 lakh crore cumulatively from the RBI and public sector financial institutions. With today’s transfer, this number would be now much higher than the budgeted estimates. We expect the fiscal deficit to ease by 20 basis points from the budgeted level to 4.2 per cent of GDP. Alternatively, it will open up for additional spending for around Rs 70,000 crore, other things remaining unchanged,” added Ghosh.
Murthy Nagarajan, head, fixed Income at Tata Asset Management said, “The RBI dividend of Rs. 2.69 lakh is lower than market expectation of Rs 3 lakh crore. This is due to RBI revising its contingent liquidity buffer to 4.5 to 7.5 percent. RBI board has increased its contingent reserve buffer to 7.5 percent, due to which this amount is lower than Rs 3 lakh crore which was the market expectation. This is a disappointment for the market, and we can expect some profit booking after the steep rally which we saw in the last 10 days.”
The central bank annually pays out a surplus to the government. This amount is determined after accounting for provisioning for bad loans, asset depreciation, employee benefits, and other statutory expenses under the RBI Act. The RBI dividend/surplus is an important source of revenue for the government especially as it provides a buffer to make up for a miss in taxes or disinvestment receipts, or higher-than-budgeted expenditure in the fiscal. It helps the government boost its fiscal position.
This surplus payout is driven by robust gross dollar sales, higher foreign exchange gains, and steady increase in interest income. Notably, the RBI was the top seller of foreign exchange reserves in January among other Asian central banks. In September 2024, foreign exchange reserves peaked to $704 billion and the RBI has sold truck loads of dollars to stabilize the currency. The dynamics of surplus for RBI was decided by its liquidity operations and interest income from its holding of domestic and foreign securities.
The RBI transfer to the government is governed by the revised Economic Capital Framework (ECF) approved by the Central Board in its 616th meeting held on May 15, 2025 under the chairmanship of RBI Governor Sanjay Malhotra. The revised framework stipulates that the risk provisioning under the Contingent Risk Buffer (CRB) be maintained within a range of 7.50 to 4.50 per cent of the RBI’s balance sheet. For FY25, the CRB has been increased to the upper limit of 7.5 per cent, reflecting improved macroeconomic stability and financial resilience. This transfer marks a sharp increase from the CRB levels
maintained during the pandemic years, when the buffer was kept at 5.5 per cent to support growth. The CRB was gradually raised to 6 per cent in FY23 and to 6.5 per cent in FY24 before this year’s upward revision.