RBI Transfers Record ₹2.69 Lakh Crore Dividend to Government for FY25

New Delhi: In a historic move, the Reserve Bank of India (RBI) has announced a record-breaking surplus transfer of ₹2.69 lakh crore to the central government for the financial year 2024–25.

This is the highest-ever dividend by the central bank, surpassing the previous year’s ₹2.1 lakh crore and ₹87,420 crore in FY23.

RBI Surplus Boosts Government Finances

Economists had predicted a surplus transfer in the range of ₹2.5–3.5 lakh crore. The final figure, ₹2.69 lakh crore, exceeded expectations and is likely to give the Union government an additional cushion of ₹50,000–60,000 crore, even as dividends from public sector banks are expected to decline due to falling interest rates.

Madan Sabnavis, Chief Economist at Bank of Baroda, attributed the bumper dividend to higher forex earnings, increased forex sales, and returns from variable rate repo (VRR) operations, particularly in a deficit liquidity environment.

Revised Economic Capital Framework (ECF)

The RBI Board has also approved changes to the Economic Capital Framework (ECF). Key highlights include:

• Contingent Risk Buffer (CRB) revised to 6.0 ± 1.5% of the RBI’s balance sheet size, replacing the earlier 6.5% with a floor of 5.5%.
• The market risk buffer will now be calculated using an integrated approach.
• The monetary and financial stability risk buffer has been expanded to 5.0 ± 1.5%, up from the earlier range of 4.5–5.5%.

These changes aim to enhance the RBI’s balance sheet resilience while ensuring continued fiscal support to the central government.

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Impact on Fiscal Deficit

The unexpected surplus could slightly reduce the fiscal deficit. Sabnavis said the fiscal deficit target may improve from 4.4% to 4.3% of GDP, offering a positive signal for markets and credit agencies.

Surplus Distribution Policy Updated

As part of the revised ECF, the surplus distribution policy has been updated:

• Any equity above 7.5% of the balance sheet size (post-adjustments) can be written back as income.
• If equity falls below the minimum threshold, no surplus will be transferred to the government.

RBI Balances Growth with Stability

The RBI had kept the CRB at 5.5% during 2018–2022, amidst economic uncertainty during the COVID-19 pandemic. It was gradually raised to 6% in FY23 and 6.5% in FY24. The latest increase to 7.5% reflects stronger macroeconomic conditions and growing confidence in the Indian economy