RBI Dividend Projections for FY25: Insights and Implications

Here’s a breakdown of the detailed information and important points regarding the potential dividend earnings from the Reserve Bank of India (RBI) for FY25:

1. Projected Dividend Amount: The Central government is expected to earn between Rs 75,000-85,000 crore as dividends from the RBI in the current financial year. This projection is slightly lower than the surplus transfer of Rs 87,416 crore recorded in FY24.

2. Budgeted Surplus Transfer: For FY25, the Centre has budgeted a surplus transfer of Rs 1.02 trillion from the RBI and public sector banks (PSBs), although it has not provided a specific breakdown.

3. Composition of RBI’s Income: The RBI’s income for FY24 is expected to be supported by interest income on foreign securities and rupee securities. However, earnings from foreign exchange transactions are anticipated to be lower compared to the previous fiscal year.

4. Factors Affecting Foreign Exchange Transactions: Gross dollar sales are tracking lower in FY24 compared to FY23, with a notable decrease in the cost of dollar purchases relative to the current spot rate. Despite lower quantum of gross dollar sales, revenues from forex transactions are expected to be substantial, albeit lower than the previous year.

5. RBI’s Balance Sheet Expansion: In FY24, the expansion of the RBI’s balance sheet was led by various factors, including:

   • Foreign currency assets, which increased by 13.8% year-on-year (y-o-y).

   • Loans and advances to schedule commercial banks (SCBs), which saw a significant increase of 136% y-o-y.

   • Gold reserves, which grew by 17.1% y-o-y.

6. Increase in Forex Reserves: The rise in forex reserves (foreign currency asset) was primarily driven by forex purchases, accounting for 70% of the increase, followed by revaluation gain.

7. Liabilities Side of RBI’s Balance Sheet: On the liabilities side, the increase in the RBI’s balance sheet was led by currency, SCB deposit, and other deposits. Currency accounted for a 49% share of total assets/liabilities in FY24, which is slightly lower than the previous fiscal year.

8. RBI Balance Sheet Size as Percentage of GDP: The RBI’s balance sheet size as a percentage of GDP increased to 24.1% in FY24, up from 23.5% in FY23. This indicates a normalization from the peak of 28.6% observed during the Covid-19 pandemic in FY21. The report expects the RBI balance sheet size to grow at a similar pace as nominal GDP in FY25, maintaining the ratio at 24%.

Overall, these points illustrate the expected dividend earnings from the RBI for FY25, along with key factors influencing the RBI’s income and balance sheet dynamics.

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