In a record-setting move, the Reserve Bank of India (RBI) has announced a dividend transfer of ₹2.7 trillion to the central government, aligning with CareEdge Ratings’ forecast of ₹2.5–3.0 trillion. This surpasses last year’s payout of ₹2.1 trillion and alone exceeds the government’s FY26 budget estimate of ₹2.6 trillion from the RBI, public sector banks, and financial institutions combined.
Despite expectations exceeding ₹3 trillion, the actual transfer was moderated by increased risk provisioning. Under the revised Economic Capital Framework (ECF), the Contingent Risk Buffer (CRB) was raised from 6.5% to 7.5% of the RBI’s balance sheet, aligning with the mandated 4.5–7.5% range.
Key contributors to the elevated dividend include substantial earnings from foreign exchange operations. The RBI’s aggressive dollar sales, prompted by a weakening rupee and FPI outflows, totaled USD 399 billion in FY25—significantly higher than the USD 153 billion in FY24. Gains from these transactions, coupled with stable interest income from rupee and foreign assets, underpinned the surplus.
The RBI’s holdings of rupee securities rose from ₹13.6 trillion to ₹15.6 trillion, while foreign currency assets inched up to ₹48.6 trillion. Though G-sec yields slightly moderated and US Treasury returns remained stable, the dividend saw only limited support from interest income.
This significant transfer is expected to positively impact liquidity, which has already shifted to surplus territory since March 2025. The RBI has injected ₹9.5 trillion via OMOs, VRR auctions, and forex swaps to support monetary policy transmission. The dividend further strengthens banking system liquidity.
On the fiscal front, the RBI’s payout slightly overshoots budget projections and offers additional fiscal space, estimated at around 0.1% of GDP. However, with slowing economic growth and weaker capex momentum, the fiscal deficit for FY26 is still expected to remain at the budgeted 4.4%.
CareEdge anticipates a further 50 basis point policy rate cut in FY26, with bond yields potentially easing to 6–6.2% by year-end, contingent on inflation trends and economic performance.
