Reserve Bank can give Rs 1000 billion to the government in the financial year 2025, claims the UBI report

The Reserve Bank of India (RBI) may transfer around Rs 1,000 billion to the government in FY 2025, according to a report by the Union Bank of India (UBI). The report said that RBI is expected to maintain a strong dividend payout in the financial year 2025 (FY25) as well.

This estimate represents a slight increase from the Rs 874 billion transferred in the previous financial year. According to the report, "The government has budgeted FY2025 dividend for RBI, public sector banks and financial institutions at Rs 1020 billion. It was Rs 1044 billion in FY 2024. In our view, this is a preliminary estimate for last year's total dividend. "This is a positive surprise considering the budget estimate was only Rs 480 billion."

Strong dividend figures are expected to continue, according to analysts, despite a number of factors influencing RBI's dividend calculations, including interest income and foreign exchange (FX) gains. Foreign currency assets make up roughly 70% of the RBI's balance sheet, with domestic government bonds making up the remaining 20%. An estimated Rs 1.5–1.7 lakh crore in interest income is anticipated from these securities.

Additionally, interest from liquidity operations has boosted RBI's income, especially as the banking system is back in deficit mode from September 2023. Although RBI's profit from forex sales declined slightly due to lower sales, the inflows are expected to remain substantial despite the increase in the weighted average cost of reserves. Moreover, the decline in provisions also contributed to an increase in RBI's dividend.