RBI Likely to Pay ₹3.5 Trillion as Dividends to Centre

Offsetting the shortfall in tax revenues amid weakening growth, the Reserve Bank of India (RBI) is set to pay a higher dividend to the government.

According to the estimates made by Kotak Mahindra Bank, RBI may transfer a dividend payout of 3.5 trillion rupees ($41.4 billion) to the government, while IDFC First Bank Ltd. expects the dividend to touch 3 trillion rupees for FY25. Last year, the payout stood at 2.1 trillion rupees.

Every year RBI makes an annual payment to the government from the surplus income it generates on investments and valuation changes on its dollar holdings, and from the fees it gets from printing currency.

The payout is set to bridge the gap in tax collections this year due to weak growth and lower disinvestment receipts amid uncertain market conditions, said Kotak’s economist Upasna Bhardwaj in a note on Wednesday. “We factor in gross tax revenue to be 1 trillion rupees lower than budgeted,” she said, highlighting a shortfall of receipts equalling 400 billion rupees from asset sales

As per experts, dividend predictions are greater than the 2.56 trillion rupees payout the government had expected from the RBI and financial institutions.

IDFC’s Gaura Sen Gupta said, higher dividend paved the way for fiscal space of up to 0.1% to 0.2% of the gross domestic product. The government is looking forward to reducing the fiscal deficit to 4.4% in the current fiscal year.