The Reserve Bank of India is expected to pay up to ₹1 lakh crore, ($12 billion) as a dividend to the federal government, economists said, a move that would boost New Delhi’s coffers and help meet its budget deficit target.

The Reserve Bank of India’s board of directors is expected to meet this week and is likely to approve a dividend ranging between ₹80,000 crore to ₹1 lakh crore , according to economists’ estimates. That compares with a transfer of ₹87,420 crore last year and the government’s own target of ₹1,02,000 crore , which includes dividends from state-controlled banks. 

If the RBI pays out a dividend worth ₹1 lakh crore , it will be the highest in five years. 

The higher dividend payout is likely to help the federal government achieve its fiscal deficit target of 5.1 per cent of gross domestic product in the current financial year. It would also likely shore up revenues for any new government that takes office after general elections conclude early next month, allowing it greater spending flexibility. 

A big surplus transfer “will help the government in meeting any shortfall in disinvestment receipts and create room for funding welfare programs after the elections,” said Teresa John, an economist with Nirmal Bang Institutional Equities, by phone. She forecasts the dividend payout to be around one trillion rupees.

The RBI makes an annual payout to the government from the surplus income it earns on investments and valuation changes on its dollar holdings, as well as the fees it gets from printing currency. It is mandated to maintain a contingency risk buffer of 5.5 per cent to 6.5 per cent of its balance sheet.

Among the key factors that could contribute to a large surplus transfer are the higher interest income that the RBI would have earned on securities held abroad and in the domestic market. Those earnings are expected on the back of a tighter monetary policy regime in many advanced economies and back home.

However, earnings on foreign exchange transactions could be lower as the RBI sold less dollars in the last fiscal year than the previous year, Gaura Sen Gupta, an economist with IDFC First Bank, wrote in a note earlier this month. In the year to March 2024, RBI’s foreign exchange reserves went up by ₹6,700 crore .

A large dividend, coupled with a high cash surplus may allow the finance ministry to cut its bond sales, aiding lower borrowing costs, people familiar with the matter said, Bloomberg reported Tuesday. India plans to borrow a record ₹14,13,000 crore in the financial year ending March 2025, according to the February interim budget.


An expected bonanza for New Delhi comes just a month before Indian bonds are added to the JPMorgan Chase and Co.’s emerging market index. That inclusion is likely to see inflows of up to ₹2500 crore and could see the RBI’s balance sheet swell in the fiscal year to March 2025, making it essential for tweaks to be carried out to meet the minimum levels of capital. The RBI is widely expected to intervene and absorb the bulk of the inflows expected due to the bond inclusion.

The ballooning of the balance sheet could lead to revisions in the RBI’s economic capital framework at some point later in the year, wrote Barclays Plc.’s economists Shreya Sodhani and Amruta Ghare in a note earlier this month. They estimate a dividend payout of over a trillion rupees, which could increase if the framework is revised.

Any reduction in contingency risk buffer, and dilution of revaluation balances, “could have material fiscal implications, by increasing dividends paid to the government,” they said.

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