RBI to Transfer Rs 2.5-3 Trillion Dividend to Government, Boosted by Forex and Repo Operations
The Reserve Bank of India (RBI) is expected to transfer a dividend of Rs 2.5-3 lakh crore to the Indian government this month, marking a sharp increase from last year’s transfer of Rs 2.1 lakh crore. The boost comes from the profits made by the RBI’s intervention in the currency markets to stabilize the rupee and its repo operations in fiscal year 2025 (FY25), according to economists.
The central bank’s heavy involvement in defending the rupee from significant depreciation, especially through dollar sales, is likely to have generated significant profits, which are now being passed on to the government. According to Madhavankutty G Group, Chief Economist at Canara Bank, the RBI’s profit from foreign exchange (forex) and repo operations last fiscal year likely contributed to this windfall.
Each year, the RBI transfers surplus income to the government after accounting for provisions for bad debts, asset depreciation, and staff contributions, in compliance with the RBI Act. The surplus is primarily derived from the RBI’s investments, dollar holdings, and fees from printing currency.
The dividend transfer is particularly significant this year due to the heightened dollar-selling activities of the RBI, which began in October 2024. These actions were intended to defend the rupee, which has been among the least volatile currencies in Asia. The RBI sold approximately $371.55 billion in dollars and purchased $322.68 billion in FY25, which likely resulted in significant profits from the sale of accumulated dollars.
The dividend transfer is a crucial revenue source for the government, with Finance Minister Nirmala Sitharaman projecting that the government will receive Rs 2.56 lakh crore from the RBI and public sector banks in FY26.
