RBI transfers record ₹2.69L crore surplus to Modi government
What's the story
The Reserve Bank of India (RBI) has approved a whopping ₹2.69 lakh crore dividend for FY25 to the Modi government. This is a significant increase from last year's transfer of ₹2.1 lakh crore for FY24.
The decision was taken at the RBI's Central Board's 616th Meeting on Friday.
The officials reviewed global and domestic economic conditions and their risks to the future outlook, and decided on the surplus payout to the central government.
Economic factors
RBI's surplus payout driven by strong dollar sales, forex gains
The huge surplus payout from the RBI is due to strong gross dollar sales, higher foreign exchange gains, and steady growth in interest income.
The central bank was the top seller of foreign exchange reserves in January among Asian central banks.
India's foreign exchange reserves peaked at $704 billion in September 2024 with the RBI estimated to have sold over $125 billion since then, according to estimates by Nomura and DBS Bank.
Fiscal impact
RBI's dividend transfer to alleviate government's financial burden
The RBI's dividend transfer will ease some of the financial burden on the government as it pursues its ambitious capital expenditure plans and sustains tax relief measures announced in Budget for FY26.
The government has earmarked ₹11.21 lakh crore for infrastructure-led growth in the current fiscal.
India's fiscal deficit stood at 5.6% in FY24, below its 5.8% target for the year due to better revenue collection and RBI's surplus payout.
Annual procedure
RBI's annual surplus transfer to the government
Every year, the RBI transfers a part of its surplus income from investments, dollar reserves' valuation fluctuations, and currency printing fees to the central government.
Economists had anticipated an increase in these payouts as the transfer window neared.
The RBI's dividend transfer may aid the Centre in cutting its fiscal deficit.
Further, government expenditure would pump liquidity into the banking system, with economists expecting this liquidity to be evident from early July.