RBI's Record ₹2.7 Lakh Crore Dividend May Ease Fiscal Deficit To 4.2% Of GDP, Says SBI Report

New Delhi: The Reserve Bank of India's bumper dividend of about Rs 2.7 lakh crore will ease the fiscal position of the government and help bolster growth in the world's fourth-largest economy, economist at SBI said in a report.

Finance Minister Nirmala Sitharaman in her Budget for 2025-26 projected a dividend income of Rs 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 per cent of GDP. Alternatively, it will open up for additional spending for around Rs 70,000 crores, other things remaining unchanged," according to the latest edition of SBI Research's Ecowrap.

RBI announced a record Rs 2.69 lakh crore dividend for the financial year 2024-25 (April 2024 to March 2024) compared with Rs 2.11 lakh crore transferred in the previous FY24, an increase of 27.4 per cent.

This follows a change in the range of contingency risk buffers that the central bank can maintain to 6 per cent +/- (plus or minus) 1.5 per cent. The buffer was previously maintained between 5.5 per cent and 6.5 per cent (6.0 per cent 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 per cent to 4.5 per cent 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 USD 704 billion and the RBI has sold "truck loads of dollar" to stabilize the currency, it said The dynamics of surplus for 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 Rs 1.2 lakh crore on March 31, 2025. Average liquidity deficit from December 16, 2024, to March 28, 2025, was Rs 1.7 lakh crore.

Durable liquidity is likely to remain surplus in FY26, supported by several factors, like OMO purchase, RBI's dividend transfer, BOP surplus of around USD 25-30 billion in FY26, according to the report.

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