In This Economy—The Biggest RBI Payout Ever Is Just Days Away

Happy Tuesday, folks! Conversations during the last week have shifted from Operation Sindoor to Operation RBI Dividend. The central bank is expected to announce a bumper surplus transfer to the government later this week. Estimates vary between Rs 2.5-3.5 lakh crore, but all point to a transfer that will outsize the government’s estimates during the budget.

But what exactly is the surplus transfer, and why is it so very important? Read on to find out in today’s newsletter.

Every year the RBI sends across a cheque to the government. Like all government-owned entities, the banking regulator is also supposed to pay the government a dividend every year. But since the RBI is not a “for-profit” organisation, it transfers a budget surplus.

This surplus is what is left after the RBI has accounted for profitable ventures, such as large dollar sales at higher exchange rates and interest earned on government and foreign securities. It accounts for all the expenses the regulator makes during its normal course of business as well, such as printing currency, creating special digital platforms, salaries, rents, bills, etc. The RBI also sets aside certain provisions as a buffer for any risk which may develop during the following year.

Back in 2018, the RBI formed a six-member committee under former Governor Bimal Jalan. This committee’s job was to review the central bank’s economic capital framework, which effectively governs the way in which the surplus is calculated.

During this review the committee recommended that the RBI set aside a contingent risk buffer ranging between 5.5% and 6.5% of its balance sheet before transferring the surplus to the government. This sliding scale can be adjusted according to the central bank’s assessment of risk during the year.

Since 2019, when the new economic capital framework was accepted by the RBI, the regulator has transferred a bumper surplus (read: all-time high) to the government twice. Once in 2019 (Rs 1.75 lakh crore) and then again in 2024 (Rs 2.1 lakh crore). There was a Rs 99,122 crore surplus transferred in 2021 as well, but that did not make the cut for the highest ever.

This year, all those records are expected to be broken. The government’s own estimates place the surplus transfer at around Rs 2.5 lakh crore. But then the year also saw large dollar sales, over $400 billion, after the dollar rose sharply. This compares with around $153 billion in sales the regulator recorded in FY24.

Just this element alone could boost the outstanding surplus, which may be as high as Rs 3.5 lakh crore for FY25, economists believe. Moreover, if the RBI decides to lower its contingency risk buffer target from 6.5% (where it was in FY24) to 5.5%, that will further boost the figures too.

This higher surplus could aid the government in boosting defence spending, capital expenditure and even some government schemes. It could also account for any shortfalls in direct tax collection and disinvestment by the government.

The government may also choose to just use these funds to bridge the fiscal deficit to show that consolidation continues, said Kotak Institutional Equities’ Suvodeep Rakshit. This is also what the government did last year after the surplus transfer.

The government estimates a fiscal deficit of 4.4% for FY26, compared to Kotak Institutional, which expects the fiscal deficit figure to fall to 4.2% of GDP, owing to the large surplus transfer.

All eyes will be set on May 23 when the RBI’s central board is set to meet and decide on the final figure. We at NDTV Profit will be closely watching it too.

1. Aishwarya Patil reports from the Supreme Court about why Vodafone Idea’s plea for further AGR relief was rejected.

2. Tushar Deep Singh writes about how Hyundai is looking to tackle India competition through the launch of a hybrid car.

3. In a bid to make its IDBI Bank acquisition offer more attractive, Emirates NBD has decided to deploy a wholly-owned subsidiary in India, sources tell me.

4. Agnidev Bhattacharya’s sources say that BluSmart’s investors are not happy with just Jaggis exiting the company and are seeking a complete overhaul of the board.

5. The government will review the Indigo-Turkish lease pact ahead of the May 31 deadline, according to Sesa Sen’s report.

Last week Qatar gifted US President Donald Trump a $400 million plane. Despite his multiple attempts to justify it and his Attorney General Pam Bondi clearing it, there is widespread criticism. Now Democrats are seeking an investigation into the deal. Whether you agree it is a bribe or not, the optics of a world leader accepting a large gift like a plane is probably not great. But then supporters say that the Statue of Liberty was a gift from France too.