RBI's dividend payment to govt for FY25 set to beat estimates, could be 50% higher than FY24
(You can now subscribe to our
(You can now subscribe to our ETMarkets WhatsApp channel
Mumbai: Reserve Bank of India's (RBI) surplus transfer to North Block for the last fiscal could be as high as ₹3 lakh crore, much higher than that estimated a month ago. Robust gross dollar sales, higher foreign exchange gains, and anticipated increases in interest income should help boost the payout, recent reports by economists said. The new estimate of ₹3 lakh crore is 50% more than the ₹2.1 lakh crore paid in the previous fiscal year.Initial estimates for FY25 worked with the ballpark of around ₹2-₹2.5 lakh crore, showed an ET poll of 10 institutions published April 14.Only ANZ Banking Group had estimated a transfer of ₹3.25 lakh crore. The government had estimated a dividend of ₹2.3 lakh crore in its budget."We estimate an RBI dividend of ₹2.6 lakh to ₹3 lakh crore, depending on the level of provisioning. The higher dividend creates a fiscal space of 0.1% to 0.2% of GDP," Gaura Sen Gupta, chief economist at IDFC First Bank , said in a report on Wednesday.Economists are raising estimated payouts as the transfer time-window nears. "RBI's FY25 dividend payout to the government is projected to increase, fuelled by higher income from forex reserve deployments due to elevated US treasury yields," a report by the ICICI Research team said. "This boost is further supported by strong commissions from forex operations and interest income on government securities."The dividend could help the Centre shrink the fiscal gap. Plus, spending from the government would pump liquidity into the banking system, and the liquidity would be visible from early July, economists said"Gross dollar sales rose to $371.6 billion in FY25, till February versus $153 billion in FY24. Meanwhile, decline in GSec yields has resulted in MTM (market to market) gains on RBI's holdings of rupee securities. In FY25, RBI's holdings of rupee securities increased by ₹1.95 lakh crore to ₹15.6 lakh crore as of March 2025," according to IDFC First Bank.The RBI was the top seller of foreign exchange reserves in January among other Asian central banks. Foreign exchange reserves peaked in September 2024 to $704 billion and the RBI is estimated to have sold over $125 billion since then, according to estimates by Nomura and DBS Bank."The RBI undertook significant dollar sales to support the rupee and maintain exchange rate stability. Additionally, tight systemic liquidity prompted the RBI to extend funds to banks, thereby contributing to its interest income. Therefore, the dividend payout for FY25 is likely to be large," said Dhiraj Nim, economist and FX strategist, ANZ Banking Group. Contingency provisions are expected to be similar to last year, or higher. Provisions stood at ₹42,800 crore and is expected to be between ₹40,000 crore and ₹80,000 crore, according to IDFC First Bank.The surplus amount of the dividend is arrived at on the basis of the Economic Capital Framework (ECF) adopted by the Reserve Bank on August 26, 2019 as per recommendations of the Expert Committee to Review the ECF chaired by former governor Bimal Jalan. Committee had recommended that the risk provisioning under the Contingent Risk Buffer (CRB) be maintained within a range of 6.5% to 5.5% of the RBI's balance sheet.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
42 minutes ago
- Time of India
Rare earth, common ground: India and China realign amid US tension
New Delhi: China has lifted restrictions on the export of rare earth magnets , fertilisers and tunnel boring machines to India in a diplomatic breakthrough, signalling a warming of ties between the Asian giants in the face of US tariff threats . With shipments of the critical inputs getting underway, the initiative to ease tensions to stabilise ties comes ahead of Prime Minister Narendra Modi's trip to China, his first in seven years, for the Shanghai Cooperation Organisation (SCO) summit at the end of the month. The development took place at the meeting that visiting Chinese foreign minister Wang Yi held with his Indian counterpart S Jaishankar in New Delhi on Monday. India-China ties making steady progress: PM The minister assured Jaishankar that China would address India's need for rare earth magnets, fertilisers and tunnel boring machines, a source said. ET has learnt that shipments of these items have already begun. On Tuesday after Wang Yi called on the PM, Modi said he's looking forward to his next meeting with the Chinese President in Tianjin on the margins of the SCO Summit. 'Glad to meet Foreign Minister Wang Yi. Since my meeting with President Xi in Kazan last year, India-China relations have made steady progress guided by respect for each other's interests and sensitivities. I look forward to our next meeting in Tianjin on the sidelines of the SCO Summit. Stable, predictable, constructive ties between India and China will contribute significantly to regional as well as global peace and prosperity,' PM Modi wrote on X. The Jaishankar-Wang Yi talks covered economic and trade issues, cross-border pilgrimage, people-to-people contacts, river data sharing, trade, connectivity and bilateral exchanges. This was the second time since July that Jaishankar had discussed the issue of trade restrictions with Wang Yi. ET had reported August 14 that India and China may discuss a trade package covering supplies of critical rare earth magnets, fertilisers and pharmaceuticals ahead of the Prime Minister's proposed China trip. The first sign of a thaw in Sino-Indian ties since 2020's border tensions comes as the Trump administration has taken a more accommodating view toward Beijing by extending a trade truce and delaying the imposition of tariffs by another 90 days on August 11, besides moving to lift curbs on the export of high-end chips to China. Trump has been more aggressive against India, threatening to double tariffs to 50%, putting in doubt the visit by a US trade team to negotiate a bilateral trade agreement. India's automobile and electronics industries, including companies such as Bajaj Auto and industry association Electronic Industries Association of India, have repeatedly flagged shortages of rare earth magnets, warning of production getting hit. In April, China mandated special export licences for seven rare earth elements and related magnets. Rare earth minerals are considered vital for high-end technology products, including electric vehicles (EVs), drones and battery storage. China has been a dominant player in the critical minerals supply chain globally. China's fertiliser curbs disrupted di-ammonium phosphate (DAP) supply during the rabi season. Beijing had stopped exports without an official notification, having been a prominent supplier of DAP to India until FY24. Imports from China crashed to 840,000 tonnes in FY25 from 2.29 million tonnes in FY24. Nothing has come to India since January this year. With China's move, Indian DAP stocks are likely to grow, ensuring timely distribution for the cropping cycle. This will relieve pressure on India's procurement channels, sources said.
Time of India
44 minutes ago
- Time of India
Focus on growth-oriented companies and stop going by market cap divisions: Alok Agarwal
Live Events You Might Also Like: Reality check: Look for these 3 red flags going ahead: Sunil Subramaniam (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel , Head - Quant and Fund Manager,, says instead of categorizing markets by market capitalization, a more effective approach involves identifying high-growth sectors and segments, many of which are currently found in the midcap space. Consumer discretionary, chemicals, agrochemicals, real estate, EMS, hotels, hospitals, and capital markets demonstrate significant growth potential. Focusing on growth-oriented companies yields better results than solely relying on market cap divisions Certainly, the GST rate rationalisation that was announced over the weekend is welcome news and it was a much needed support for stimulating the economy. Over the last few months, RBI has been taking a lot of steps on the monetary side. Earlier, the government had taken some steps through direct tax adjustments and making a lot of regulations easier as well. But what was required was the stimulus on the fiscal side to ensure that a proper stimulation of consumption happens at the broader level. The suggestion given by the government to the group of ministers to rationalise the GST rates would go a long way in ensuring that the consumption stocks and consumption companies and sectors will start doing sectors have been slowing down and are still not showing too many signs of growth. Those remain underweight – the likes of IT, FMCG, and to an extent, oil and gas as well. But the sector that is the most structural sector in India has typically been the consumer discretionary. In the short term, it was showing some kind of a slowdown and now with this GST rate rationalisation, it should start showing a pickup.A lot of newer sectors which were not really part of the frontline indices, have been doing pretty well. The likes of electronic manufacturing, hospitals, realty, consumer durables. A lot of those segments have started coming back very well and we are quite overweight on those segments that are growing at a faster pace and have a great visibility of growth as said that, a lot of technology-oriented platform companies have started coming in, be it in the fintech space, insurance space, consumption or food delivery. A lot of those companies may not be really part of the frontline indices but they are really growing at a good whole market has been waiting for these segments to start growing and we have seen that the credit growth and deposit growth has not really been picking up. They have been hovering somewhere around 10%, which is quite a sub-optimal number to have. Given that the rate cycle that we are in, a lot of these banks may still have some more way of NIM pressure to be seen, but yes, with consumption growth likely to pick up, that is likely to have some positive impact on deposit and credit growth as remain selectively positive on the lender side, but within the financial space, we are more positive on the capital market plays and the whole value chain right from the exchanges to the wealth managers to the asset managers and to select brokers are all showing a very good growth and visibility of growth as are two types of narratives in the market. One says that the largecaps are at 21 times one year forward valuation compared to midcaps at 27 times and hence largecaps are cheaper, one should be in largecaps. Coming to valuations in the context of growth, the growth numbers are much higher in the slightly broader markets on the midcap space due to which on a per percentage growth basis as we call as PEG ratios, the valuations don't seem too instead of segmenting the markets into the large, mid, and smallcap basis, the better way would be to see what among those sectors and segments are growing better and those sectors actually currently happen to be more in the midcap space. We named a few of them, the consumer discretionary, chemicals, the agrochem as well, fertilisers, some real estate names, EMS companies, hotels, hospitals, exchanges and the whole capital marketplace as I mentioned. A lot of these names happen to be in the midcap space. The larger caps are dominated by sectors which are not growing at a great pace. So, focusing on the growth and the segments and cohort of companies that are providing that growth would fetch us better results instead of focusing too much on the market cap is perfectly true. The auto sector is the poster boy of consumer discretionary play in India. It is one of those rare sectors where predominantly almost the whole market is in the formal zone. There is no informal zone there. The bulk of the vehicles faced around 28% GST. If a lot of them come to around 18% or so, it would be quite a relief for the consumers and the price elasticity in that segment will also be pretty high. That is expected to generate volume growth and hence that should be are positive both on the auto as well as on the auto ancillaries because once the volume growth picks up, the whole engine on the supply chain on the ancillary side also picks up. So, we remain positive on that side of the auto those which could be directly impacted by some imposition of tariffs, other than that, a lot of these chemicals have started showing some decent growth numbers coming back. We have had a period where after a very high pace of growth, a lot of these companies went into capex and hence the consolidation of earnings was underway for the last few years. But now, if we look at the last few quarters as well, the chemicals pack has started showing good double-digit growth as well. So, we are quite selectively positive on those segments where the visibility is high, especially among specialty chemicals names.
Time of India
an hour ago
- Time of India
GST, tariff hopes lift rupee; up 40 paise versus dollar
AI-generated image MUMBAI: The rupee recorded its biggest daily gain in a month, regaining the 86 level, with the domestic unit firming up 40 paise to close at 86.95 on Tuesday, up from 87.35 on Monday. The rally came on optimism that the U.S. may ease its stance on additional 25% tariffs after talks between Donald Trump, Vladimir Putin and Volodymyr Zelenskiy, raising hopes of a peace deal that could also reduce the likelihood of fresh sanctions on India's Russian oil imports. Optimistic rise Domestic drivers also supported the currency, including stronger consumption trends and the government's plan to cut goods and services tax (GST) rates - the biggest such reform in eight years. Economists said the move could lift near-term growth momentum, improve sentiment and help revive foreign portfolio flows that had recently turned negative. The rupee further drew strength from a recent credit rating outlook upgrade for India, which has bolstered confidence in the economy. According to Jateen Trivedi of LKP Securities, the upgrade, along with reduced selling pressure from foreign investors and positive signals from India-Japan ties ahead of the Prime Minister's visit to Tokyo later this month, has helped improve sentiment, with the rupee expected to trade in a range of 86.60-87.25. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like TV providers are furious: this gadget gives you access to all channels Techno Mag Learn More Undo Dilip Parmar of HDFC Securities noted that the Indian rupee outperformed Asian currencies due to risk-on sentiment, supported by growth-focused policies, renewed foreign fund inflows and a technical pullback. He added that the spot USD/INR rate is likely to find support at 86.80 and face resistance near 87.20 in the near term. Stay informed with the latest business news, updates on bank holidays , public holidays , current gold rate and silver price .
