RBI Dividend To Government Expected To Be 'Much Higher' Than Expected: Citi

Citi Research has projected the Reserve Bank of India's dividend to the government at Rs 3.5-4 lakh crore, "much higher" than the budgeted amount of Rs 2 lakh crore.

Its report mentioned that the gross forex spot sale by RBI for the period May 2024-April 2025 has exceeded the previous two years' sale combined. Moreover, the firm noted that the central bank has seen a 7% annual growth in fiscal 2025 "which might lead to higher provisioning requirement of ~INR 300-350bn, assuming they maintain contingency risk buffer (CRF) at 6.5% of assets."

Hence, assuming that the Economic Capital Framework remains largely unchanged, Citi projects the dividend to be considerably higher than the budgeted amount. It stated, "This could help in neutralizing any potential loss in tax revenue from lower-than-expected nominal GDP growth and the govt could potentially focus on capex, defense or other spending in FY26 too."

Economists peg the RBI's surplus transfer at a fresh record high, led by the central bank's earnings on foreign exchange transactions. On Thursday, the RBI Central Board reviewed the Economic Capital Framework, according to an official notification. The meet comes ahead of deciding and approving the surplus transfer to the government, expected to range between Rs 2.5 lakh crore and Rs 3.5 lakh crore. This is compared to a previous record high of Rs 2.1 lakh crore last year.

The RBI’s surplus transfer is a function of valuation gains on its reserves, earnings on forex transactions, and investment earnings, apart from the issuance of currency, Radhika Rao, senior economist at DBS Bank said.