RBI’s dividend bonanza driven by robust gross dollar sales, higher forex gains

New Delhi:  The record Rs 2.69 lakh crore dividend bonanza by the Reserve Bank of India (RBI) to the government is driven by robust gross dollar sales, higher foreign exchange gains, and steady increases in interest income, according to a new report.

Notably, the RBI was the top seller of foreign exchange reserves in January among other Asian central banks. In September 2024, foreign exchange reserves peaked to $704 billion and the RBI has sold truck-loads of dollar to stabilise the currency.

Simultaneously, in a prudent move, the RBI has increased the risk buffer, otherwise the dividend transfer could have topped Rs 3.5 lakh crore,” according to SBI Research’s ‘Ecowrap’ report.

“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. The transferable surplus for the year has been arrived at on the basis of the revised Economic Capital Framework (ECF) as approved by the Central Board in its meeting held on May 15, 2025,” the report mentioned.

Based on the revised ECF, and taking into consideration the macroeconomic assessment, the Central Board decided to further increase the CRB to 7.5 per cent (from 6.5 per cent in FY24 and 6.0 per cent in FY23).

The dynamics of surplus for RBI was decided by its Liquidity Adjustment Facility (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.

However, after mid-December. the system liquidity turned to injection mode till end March 2025. The average absorptions add to RBI expenses under LAF.

The Union Budget for 2025-26 had projected a dividend income of Rs 2.56 lakh crore cumulatively from the Reserve Bank and public sector financial institutions.

With today’s transfer, this number would be now much higher than the budgeted estimates.

“We expect fiscal deficit to ease by 20 bps from the budgeted level to 4.2 per cent of GDP. Alternatively, it will open up for additional spending for around Rs 70,000 crore, other things remaining unchanged,” said the report.

–IANS