RBI Dividend 2025: How India's Central Bank Earns Money, Why It Shares Profits With Government?
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The RBI will announce its FY 2024-25 dividend payout today. Last year, it transferred Rs 2.1 lakh crore. This year's dividend may exceed Rs 3 lakh crore, boosting fiscal plans.
RBI Dividend 2025: The Reserve Bank of India (RBI) is expected to announce the dividend payout to the central government for the financial year 2024-25 today, May 23. This much-anticipated announcement will be made after a meeting of the Central Board of Directors of the RBI, where the quantum of surplus transfer will be finalised.
Last year, the RBI stunned the markets by transferring a record surplus of Rs 2.1 lakh crore for FY24, more than double the Rs 87,416 crore transferred in FY23. This year, the dividend is likely to be even higher, providing a potential fiscal boost to the government ahead of key expenditure plans.
Why Does RBI Transfer Dividend to the Government?
The RBI, like other central banks, earns a surplus every year through various operations and transfers a portion of this surplus to the central government as dividend or surplus transfer. This transfer is governed by the Economic Capital Framework (ECF), which was reviewed and revised in 2019 based on recommendations from a committee led by former RBI Governor Bimal Jalan.
As per the ECF, the RBI is required to maintain a certain level of risk provisioning — specifically under the contingent risk buffer (CRB) — within a range of 6.5 per cent to 5.5 per cent of its balance sheet. The remaining surplus after provisioning becomes eligible for transfer to the government.
How Does RBI Earn Money?
The RBI earns returns on its foreign exchange reserves (which include holdings in dollars, euros, gold, etc.). These reserves are invested in safe foreign assets, which yield interest or capital gains.
The RBI has increased its gold holding recently. The gold prices have surged sharply in the past few months, thus boosting the financials of the RBI.
3. Open Market Operations (OMO)
Through buying and selling of government securities in the open market, the RBI earns trading income, especially during phases of interest rate volatility.
4. Liquidity Management Operations
The interest earned on the funds lent to banks via liquidity windows like repo operations also contributes to the RBI's earnings.
5. Currency Issuance and Seigniorage
The RBI earns seigniorage, the difference between the cost of printing currency and its face value. While the cost of printing a Rs 500 note might be a few rupees, it carries a purchasing power of Rs 500.
6. Fees and Charges
It also collects fees for banking services it provides to the government and commercial banks, including services related to debt management and clearing operations.
What is the Economic Capital Framework?
The Economic Capital Framework (ECF) is the mechanism that guides the RBI's decision on how much of its annual surplus should be kept as reserves and how much can be transferred to the Centre. The ECF seeks to strike a balance between the RBI's need for financial resilience and the government's fiscal requirements.
Last week, the Central Board of the RBI reviewed the ECF to ensure it remains aligned with changing economic conditions, risks, and the Reserve Bank's balance sheet dynamics.
What to Expect Today?
The Union Budget for the current fiscal has projected a dividend income of Rs 2.56 lakh crore from the Reserve Bank and public sector financial institutions.
However, according to reports, the RBI dividend payout is expected to be significantly higher this time. The central bank is likely to announce a record dividend between Rs 2.5 lakh crore and Rs 3 lakh crore for the government for FY25.
In the previous financial year 2023-24, the RBI had transferred a record surplus amount or dividend of Rs 2.1 lakh crore to the government. The quantum was more than double that of Rs 87,416 crore paid for the financial year 2022-23.
The surplus transfer will not only help finance welfare schemes and infrastructure but could also aid in keeping the fiscal deficit target on track.
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dividend Reserve Bank of India Reserve Bank of India (RBI)
Location :
New Delhi, India, India
First Published:
May 23, 2025, 09:48 IST
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