RBI pays record ₹2.69 Trillion dividend to Centre for FY25

26 May 2025 , 09:30 AM

ANOTHER RECORD DIVIDEND DECLARED BY RBI FOR FY25

The Reserve Bank of India (RBI) declared a record dividend of ₹2.69 Trillion for fiscal year 2024-25. This will be budgeted as revenues for the central government for fiscal 2025-26, the ongoing fiscal year. The table captures RBI dividend data for last 8 years.

Financial Year	RBI Dividend (₹ in Crore)	YOY Change (%)
Fiscal Year 2017-18	50,000
Fiscal Year 2018-19	1,75,988	251.98%
Fiscal Year 2019-20	57,128	(67.54%)
Fiscal Year 2020-21	99,122	73.51%
Fiscal Year 2021-22	30,307	(69.42%)
Fiscal Year 2022-23	87,416	188.44%
Fiscal Year 2023-24	2,10,874	141.23%
Fiscal Year 2024-25	2,68,590	27.37%

Data Source: RBI (negative figures in brackets)

As can be seen from the above table, the dividend payout, or the surplus distribution by the RBI to the government has been fairly erratic in the 7 years.  However, FY23 and FY24 saw growth of over 100%, but FY25 has seen growth toning down to 27.4%, albeit on a much larger base. Ahead of the dividend announcement on May 23, 2025; economists were expecting dividend in the region of ₹2.75 Trillion to ₹3.25 Trillion. However, RBI decided to err on the side of caution. While the RBI dividend is still high at ₹2.69 Trillion, it is lower than expected. That is because, RBI decided to increase the contingency risk buffer (CRB) from the previous level of 6.5% to 7.5%, to guard the monetary system against shocks.

BIMAL JALAN’S RBI DIVIDEND PAYMENT FRAMEWORK

The formula for dividend payout is based on the recommendations of the Bimal Jalan Committee constituted in 2018-19. As per the Bimal Jalan Committee recommendations, RBI uses the Economic Capital Framework (ECF) to decide on the amount of dividends. Under the ECF, any surplus after staff contributions, expenses, asset depreciation, and provision for bad and doubtful debts has to be transferred to the government. However, this would be subject to the contingent risk buffer (CRB). This year, the CRB was increased from 6.5% to 7.5%, which explains why the RBI dividend was slightly lower than street expectations. The CRB is intended to cover all monetary, fiscal stability, credit, and operation risks that the financial system is exposed to.

WHERE DO RBI REVENUES COME FROM?

That is the million dollar question. Principally, RBI earns revenues from 4 sources.

• RBI sits on forex reserves of nearly $700 Billion, and is among the top 5 countries in terms of reserves. Most of its foreign currency holdings are in sovereign bonds and the RBI earns interest. Remember, US 10-year treasuries offer an attractive 4.5%.
• Secondly, RBI is buying and selling dollars to stabilize the USDINR exchange rate. RBI keeps it in a range and avoids volatility. In FY25, RBI bought dollars at an average price of ₹83/84 and sold at ₹86/87. These gains are part of RBI revenues.
• RBI earns from the spread between the yield at which it lends to banks and the cost at which it borrows. This is normally done through the RBI’s variable rate repo (VRR) and variable rate reverse repo (VRRR) activities in the Indian financial market.
• Lastly, RBI also gains from revaluation of gold holdings when prices go up. In the last one year, the price of gold has appreciated between 30% to 35%. RBI has also been an aggressive buyer in gold this year, so it also adds up to substantial gains on gold.

That is how the dividend / surplus distribution of ₹2,68,590 Crore has been declared by the RBI for 2024-25. However, the Centre will show this dividend as revenue for 2025-26 FY.

WHAT DOES GOVERNMENT DO WITH THIS DIVIDEND BONANZA?

How best can the RBI utilize the dividend bonanza. If one looks at Union Budget 2025-26, the RBI dividend plus PSU Bank dividend is pegged at ₹2.56 Trillion. This year, the PSU Bank dividend is pegged at around ₹25,000 crore, so including the RBI dividend, it will be ₹2.94 Trillion. That is about 15% higher than the budget estimates. However, this year the fiscal deficit could take a hit on account of higher defence spending amidst a volatile geopolitical scenario. The centre has targeted 4.4% fiscal deficit for FY26, so the RBI may not have much left to contribute to the capex cycle. That is something, the private sector has to manage on its own. It is high time, after all!