RBI set to transfer bumper Rs 2.5-3 lakh crore dividend to govt, short-term bonds rally

New Delhi, May 21 (IANS) The Reserve Bank of India (RBI) is likely to transfer a bumper dividend to the Central government -- in the range of Rs 2.5-3 lakh crore – which has led to a rally in short-term bonds, analysts said on Wednesday.

The RBI dividend would represent a sharp jump from last year’s dividend transfer which was at Rs 2.1 lakh crore.

“The dividend is also likely to be higher than the FY26 budgeted amount of Rs 2.6 lakh crore (Rs 2.6 trillion) expected from the RBI, nationalised banks and financial institutions collectively. The key determinant likely for such a huge dividend could be the upbeat gains from dollar sales,” said Rajani Sinha, Chief Economist, CareEdge Ratings.

The gross dollar sales rose notably to $371.6 billion up to February in FY25, compared to $153 billion in the full-year FY24.

Higher quantum of dollar sales along with the increased margin between the historical price of dollar purchases vis-a-vis the sales price is anticipated to have driven large gains from dollar sales throughout FY25.

“Other key factors such as the interest income on rupee and foreign securities could have also lent some support to the higher dividend,” Sinha observed.

The previous record dividend transferred to the government at Rs 2.1 lakh crore during 2024-25 helped to keep the fiscal deficit in check, while enabling the Finance Ministry to continue with its expenditure on big ticket infrastructure projects to spur growth and social welfare schemes to uplift the poor.

This was a record jump from the Rs 87,416 crore transferred to the government in 2023-24 for the profit made in 2022-23. Similarly, the government is expected to get another booster shot through the RBI dividend in the current financial year as well.

Among the RBI’s earnings, forex transactions are expected to be most significant in light of the in light of the central bank’s measures to lower rupee volatility by strong dollar purchases earlier in fiscal 2025 and difference in the current versus historical exchange rate.

“Add to this the interest income on government securities and earnings from funds extended to banks in midst of previous tight liquidity. "This transfer could amount to a record high at around Rs 2.5-2.7 lakh crore this year,” according to Radhika Rao, senior economist at DBS Bank.

With support from the higher-than-budgeted RBI surplus and savings on a few expenditure heads, the central government is in a fairly strong position to counter the growth slowdown risks and any potential emergency spending requirements.

--IANS

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