RBI's FY25 dividend to centre expected to top Rs 2.5 lakh crore

Mumbai: Surplus transfer for FY25 from the central bank to the government could easily top ₹2.5 lakh crore, economists and analysts said, dwarfing last year's mega dividend payout by nearly a fifth. This would exceed the Centre's budgeted estimates for FY26 with relative ease, and reduce the need for North Block to borrow more through a year of expectedly state-led growth.

Economists believe record high dollar sales by the Reserve Bank of India ( RBI) to protect the rupee's exchange rate and interest earned from large scale liquidity operations have boosted the prospects of a bumper payout, which one overseas banking group believes could be as high as ₹3.5 lakh crore.

The RBI, which is the government's debt manager, is likely to announce the transfer of its surplus funds of FY25 to the government in late May. The RBI had paid ₹2.1 lakh crore last year, which was double the expectations.

These funds could help the Centre shrink the fiscal gap. Plus, spending from the government would pump liquidity into the banking system. The government had estimated a dividend of ₹2.2 lakh crore in its budget.

"This dividend gives GOI room to correct their fiscal deficit, especially since there has been a drop in tax collection due to the slowdown in the economy. Additionally, there will be very high liquidity that would be coming via this route, which would be good for the bond market, pushing down yields especially of the shorter tenured bonds," Madhavi Arora, chief economist at Emkay Global Financial Services told ET.

Emkay expects the dividend to be in the range of ₹2.8-3 lakh crore.

Calculations conducted by analysts based on public information about the RBI's balance sheet make a case for the central bank to surpass last year's surplus transfer of ₹2.1 lakh crore.

"The RBI undertook significant dollar sales to support the rupee and maintain exchange rate stability. Additionally, tight systemic liquidity prompted the RBI to extend funds to banks, thereby contributing to its interest income. Therefore, the dividend payout for FY25 is likely to be large," said Dhiraj Nim, economist and FX strategist, ANZ Banking Group. Nim expects the dividend to be in the range of ₹2.5 to 3.5 lakh crore.