The Reserve Bank of India (RBI) will transfer a record-breaking ₹2.69 lakh crore as surplus dividend to the central government for the financial year 2024–25, it announced on Friday. This marks the highest-ever dividend by the central bank, significantly higher than the ₹2.1 lakh crore in FY24 and ₹87,420 crore in FY23.
Economists had estimated this year’s transfer to fall between ₹2.5–3.5 lakh crore. The bumper dividend is attributed to higher forex earnings, increased forex sales, and returns from variable rate repo (VRR) operations in a deficit liquidity scenario, according to Madan Sabnavis, chief economist at Bank of Baroda.
The RBI’s board also revised the Economic Capital Framework (ECF), updating the Contingent Risk Buffer (CRB) range to 6.0 ± 1.5% of the balance sheet size, from the previous 6.5% with a floor of 5.5%. This buffer includes provisions for monetary and financial stability risks, credit risk, and operational risk.
Sabnavis noted that this higher-than-expected transfer could leave the government with an extra ₹50,000–60,000 crore, despite potentially lower dividends from public sector banks due to falling interest rates. He said the fiscal deficit may benefit marginally—possibly improving from 4.4% to 4.3%.
From 2018-19 to 2021-22, due to Covid-19 and economic uncertainty, RBI had kept the CRB at 5.5% to support growth. It was raised to 6% in FY23 and 6.5% in FY24. Now, the RBI has further increased the CRB to 7.5%, reflecting stronger macroeconomic conditions.
Other key changes under the revised ECF:
- Market risk buffer will now be computed using an integrated approach.
- Monetary and financial stability risk buffer widened to 5.0 ± 1.5%, up from 4.5–5.5%.
- Surplus distribution policy updated: Any equity beyond 7.5% of the balance sheet size (after adjusting for shortfalls) may be written back to income. If equity falls below the minimum required level, no surplus will be transferred to the government.
The RBI stated that the updated framework aims to further strengthen its balance sheet resilience while maintaining healthy surplus transfers to the government.