RBI's Record Dividend Boosts Government Funds with $2.7 Trillion Payout

The Reserve Bank of India (RBI) has announced a record dividend payout of close to Rs 2.7 trillion to the government, enabled by substantial gross dollar sales, enhanced foreign exchange gains, and a consistent rise in interest income, according to the State Bank of India (SBI) report.

The report emphasizes the RBI's significant surplus transfer, largely due to its prominent activity in the foreign exchange market. Notably, the central bank was the largest foreign exchange reserves seller among Asian central banks as of January 2025.

To stabilize the rupee, the RBI undertook large-scale dollar sales, peaking India's foreign exchange reserves at USD 704 billion in September 2024. The subsequent selling strategy amplified foreign exchange gains, contributing to the surplus, while an increase in rupee securities holdings further boosted income.

Despite declines in government securities' yields affecting mark-to-market gains, overall interest income maintained a steady ascent. SBI's report also commended the RBI's prudent financial stability approach. With a Rs 2.7 trillion dividend, this could surpass Rs 3.5 trillion, had the RBI not augmented its risk buffer.

The new economic capital framework, approved on May 15, 2025, determined the transferable surplus, with the contingency risk buffer remaining within 7.5% to 4.5% of the balance sheet. This surplus significantly exceeds budget expectations, projecting Rs 2.56 lakh crore in dividend income for 2025-26.

(With inputs from agencies.)