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The Hindu
23-05-2025
- Business
- The Hindu
RBI to transfer ₹2.69 lakh crore to Govt. as dividend, raises CRB to 7.5%
The Central Board of Directors of the Reserve Bank of India (RBI) on Friday, which met under the Chairmanship of Governor Sanjay Malhotra, approved the transfer of ₹2,68,590.07 crore surplus to the Union government as dividend for the accounting year 2024-25. This amount is 27% more than ₹2,10,874 crore paid as dividend in the previous year. Based on revised Economic Capital Framework (ECF) and taking into consideration the macroeconomic assessment, the board decided to further increase the Contingent Risk Buffer (CRB) to 7.50%. During accounting years 2018-19 to 2021-22, owing to the then prevailing macroeconomic conditions and the onslaught of COVID-19 pandemic, the board had decided to maintain the CRB at 5.50% of the Reserve Bank's balance sheet size to support growth and overall economic activity. The CRB was increased to 6% per cent for FY 2022-23 and to 6.50% for FY2023-24. Now, it was increased further. 'The board reviewed the global and domestic economic scenario, including risks to the outlook. The board also discussed the working of the Reserve Bank during the year April 2024 – March 2025 and approved the Reserve Bank's Annual Report and financial statements for the year 2024-25,' the RBI said in a statement. 'The transferable surplus for the year (2024-25) has been arrived at on the basis of the revised ECF as approved by the Central Board in its meeting held on May 15, 2025. The revised framework stipulates that the risk provisioning under the CRB be maintained within a range of 7.50 to 4.50 per cent of the RBI's balance sheet.' it added. Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor, State Bank of India said 'In a prudent move, the RBI has increased the risk buffer, otherwise the dividend transfer could have topped Rs. 3.5 trillion.' '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% of GDP,' he said. 'This surplus payout is driven by robust gross dollar sales, higher foreign exchange gains, and steady increases in interest income. 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 sold truckloads of dollars to stabilise the currency,' he added. Aditi Nayar, Chief Economist & Head - Research & Outreach, ICRA Ltd said, 'The surplus transfer of Rs. 0.4-0.5 trillion [Rs 40,000 to Rs 50,000 crore] (equivalent to 11-14 bps of GDP), higher than the amount that was likely assumed in the FY2026 Union Budget, implies an equivalent upside to non-tax revenue, which would provide some buffer to make up for a miss in taxes or disinvestment receipts, or higher-than-budgeted expenditure in the fiscal.' 'Additionally, the upward revision in the FY2025 nominal GDP number suggests that despite a relatively lower growth of 9% in FY2026 vis-à-vis the budgeted levels of 10.1%, the fiscal deficit-to-GDP ratio can be contained at 4.4% in FY2026, while also accommodating a marginal fiscal slippage (to the tune of Rs. 30,000 crore). This provides some comfort on the fiscal front,' she added. Murthy Nagarajan, Head – Fixed Income, Tata Asset Management said, 'RBI dividend of Rs. 2.69 lakh is lower than market expectation of Rs 3 lakh crore. This is due to RBI revising its contingent liquidity buffer to 4.5 to 7.5%. This is a disappointment for the market, and we can expect some profit booking after the steep rally which we saw in the last 10 days.' The board meeting was attended by Deputy Governors M. Rajeshwar Rao, T. Rabi Sankar, Swaminathan J., Dr. Poonam Gupta and other Directors of the Central Board including Ajay Seth, Secretary, Department of Economic Affairs, Nagaraju Maddirala, Secretary, Department of Financial Services, Satish K. Marathe, Revathy Iyer, Prof. Sachin Chaturvedi, Pankaj Ramanbhai Patel and Dr. Ravindra H. Dholakia.
News18
23-05-2025
- Business
- News18
RBI Announces Record Rs 2.69 Lakh Crore FY25 Dividend For Central Government
Last Updated: The Reserve Bank of India announced a record dividend payout of Rs 2.69 lakh crore to the central government for FY 2024-25, surpassing last year's Rs 2.1 lakh crore. RBI Dividend 2025: The Reserve Bank of India (RBI) on Friday announced a dividend payout of record Rs 2.69 lakh crore for the central government for the financial year 2024-25. This much-anticipated announcement was made after the 616th meeting of the RBI's Central Board of Directors under the chairmanship of RBI Governor Sanjay Malhotra. Last year, the RBI had transferred a record surplus of Rs 2.1 lakh crore for FY24, more than double the Rs 87,416 crore transferred in FY23. 'The Board thereafter approved the transfer of Rs 2,68,590.07 crore as surplus to the Central Government for the accounting year 2024-25," the RBI said in a release. The board reviewed the global and domestic economic scenario, including risks to the outlook, RBI said in a statement. The record dividend provides a potential fiscal boost to the government ahead of key expenditure plans. 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. First Published: May 23, 2025, 17:33 IST
Indian Express
23-05-2025
- Business
- Indian Express
RBI's risk buffer seen rising with Economic Capital Framework review, may dent dividend to govt in future
As the Reserve Bank of India's central board of directors meets today, all eyes would be on its decision regarding the Economic Capital Framework (ECF) — a rule-based system for the provisions the central bank must make against the risks it faces. While an increase in the risk buffer is likely due to the rising geopolitical tensions and global trade disruptions, this decision is being keenly watched as it could lead to a significant fiscal fallout — a reduction in the dividend the government gets from the RBI going ahead. The RBI's Central Board of Directors met last week to review the regulator's Economic Capital Framework. The meeting of the board now comes after an internal review of the framework which was earlier outlined by the expert committee led by former governor Bimal Jalan in August 2019. The committee had suggested the framework be examined every five years. 'Nevertheless, if there is a significant change in the RBI's risks and operating environment, an intermediate review may be considered,' it had added. The review of the framework is crucial as it can potentially dent a key source of revenue of the central government: the annual dividend from the RBI. The dividend for 2024-25 is expected to be transferred to the government this month and economists think it could be as high as Rs 3.2 lakh crore, or 6.3 per cent of the Indian government's budgeted expenditure for 2025-26. The Economic Capital Framework provides a rule-based system for the provisions the RBI must make against the risks it faces. These provisions are to be made from the revenue the apex bank generates in the normal course of its operations and after it has met its expenses. A key recommendation of the Jalan committee was that the RBI should set aside 5.5-6.5 per cent of its balance sheet as a Contingent Risk Buffer to meet the credit, operational, and financial and monetary stability risks it faced. This means, if the RBI's balance sheet grows by Rs 100 in any given year, the central bank would have to provide an additional Rs 5.5-6.5. After maintaining a Contingent Risk Buffer of 5.5 per cent for three years after the Jalan committee's recommendations were accepted, the RBI increased it to 6.0 per cent in 2022-23 and further to 6.5 per cent in 2023-24. It is this key ratio, among other aspects, that would have been reviewed in recent months. What would a hypothetical increase in the Contingent Risk Buffer to 7.0 per cent from 6.5 per cent mean for the dividend? Considering its balance sheet expanded by around 7.0 per cent in 2024-25, the RBI would have to provide nearly Rs 70,000 crore to ensure its Available Realised Equity is equal to 7.0 per cent of its balance sheet. As at the end of 2023-24, the Available Realised Equity — the sum of the RBI's Contingency Fund, Asset Development Fund, capital, and Reserve Fund — stood at Rs 4.58 lakh crore, or 6.5 per cent of its balance sheet. Should the buffer be retained at 6.5 per cent for 2024-25, then the Available Realised Equity would have to be increased by around Rs 32,000 crore given a 7.0 per cent expansion of the balance sheet. While a hike in the Contingent Risk Buffer from 6.5 per cent would no doubt dent the dividend the government would get, it may still exceed last year's Rs 2.11 lakh crore largely on account of the RBI's gains from its foreign exchange transactions. 'While there are discussions that the RBI may tweak the economic capital framework and widen the contingent risk buffer (realised capital), we do not think this would impact the RBI's profit this year,' Madhavi Arora and Harshal Patel, economists at Emkay Global Financial Services, said in a note on Thursday. The duo sees the RBI's dividend for 2024-25 around Rs 3.2 lakh crore, higher than the Rs 2.56 lakh crore estimated in the 2025-26 Union Budget as dividend from the central bank and public sector banks and financial institutions. In 2024-25, the RBI's gross foreign currency sales rose to an all-time high of $398.71 billion. To put this figure into perspective, its gross sales of $153.03 billion in 2023-24 helped generate an exchange gain of Rs 83,616 crore – or 30 per cent of the RBI's total income that year. According to Gaura Sen Gupta, IDFC FIRST Bank's chief economist, the RBI's gains from foreign exchange transactions may have more than doubled in 2024-25 to Rs 1.73 lakh crore. The RBI makes an exchange gain on its foreign exchange transactions when the price at which it sells a foreign currency is higher than the historical acquisition cost. According to Sen Gupta, the historical cost of the RBI's gross dollar purchase is currently tracking at Rs 68.4. The rupee ended 2024-25 at around 85.5 per dollar after having fallen to an all-time low of 87.95 per dollar in early February 2025.
News18
23-05-2025
- Business
- News18
RBI Dividend 2025: How India's Central Bank Earns Money, Why It Shares Profits With Government?
Last Updated: 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. Stay updated with all the latest business news, including market trends, stock updates, tax, IPO, banking finance, real estate, savings and investments. Get in-depth analysis, expert opinions, and real-time updates—only on News18. Also Download the News18 App to stay updated! tags : dividend Reserve Bank of India Reserve Bank of India (RBI) Location : New Delhi, India, India First Published: May 23, 2025, 09:48 IST News business » economy RBI Dividend 2025: How India's Central Bank Earns Money, Why It Shares Profits With Government?
Indian Express
15-05-2025
- Business
- Indian Express
RBI Board reviews Economic Capital Framework; dividend to govt may rise up to Rs 3 lakh crore
The central board of directors of the Reserve Bank of India (RBI) on Thursday reviewed the Economic Capital Framework (ECF), which is used to determine risk provisioning and surplus distribution by the central bank to the government. Based on the ECF, the RBI transfers dividend to the government every year. According to various estimates, the RBI may transfer Rs 2.5 lakh crore to Rs 3 lakh crore as surplus to the government for the accounting year 2024-25. This would be a fresh record dividend transfer by the RBI to the government. For the accounting year 2023-24, the RBI had transferred the highest-ever surplus transfer of Rs 2.11 lakh crore to the government The central board of the RBI is likely to meet on May 23 to determine the dividend amount to be transferred to the government for FY25, in line with the revised Economic Capital Framework. 'The 615th meeting of the Central Board of Directors of the RBI was held today in Mumbai under the Chairmanship of Sanjay Malhotra, Governor. As part of the agenda, the Board reviewed the Economic Capital Framework (ECF) of the RBI,' the central bank said on Thursday. Higher dividend payout by the RBI will help the government in managing the fiscal deficit. The higher surplus transfer is also likely to improve liquidity conditions in the system. The RBI transfers surplus to the government from its profit after setting aside Contingency Risk Buffer (CRB). The RBI's CRB is the country's savings for a 'rainy day' (a financial stability crisis) which the central bank consciously maintained in view of its role as Lender of Last Resort (LoLR). In FY25, the central bank's earnings in FY25 were robust, led mainly by sale of dollars to curb volatility in the rupee and sharp rise in gold prices and appreciation in prices of government securities held by the RBI. 'With the announcement of the RBI dividend this month, we expect banking liquidity to be approximately Rs 6 lakh crore. Such high banking liquidity could lead to higher rally at the short end of the curve,' as per a recent report by Axis Mutual Fund. An expert committee led by Bimal Jalan, former RBI Governor, was set up in November 2018, to review the ECL framework of the RBI. In August 2019, the RBI had adopted the recommendations of the expert committee on ECF. The committee had suggested that the RBI's contingency risk buffer (CRB) should be maintained in a range of 5.5 per cent to 6.5 per cent of the central bank's balance sheet. In FY24, the RBI's contingency provisioning was around Rs 42,800 crore. In 2022-23, the RBI's dividend to the government was Rs 87,416 crore. In 2021-22, the RBI transferred a surplus of Rs 30,307 crore, which was the lowest in 10 years. The RBI paid Rs 99,122 crore as dividend to the government in FY2021. During the accounting year 2019-20, Rs 57,128 crore of surplus was transferred to the government. The Jalan committee had also recommended that the framework may be periodically reviewed every five years. Accordingly, the ECF review was scheduled for August 2024.
