RBI Approves Record Dividend Transfer to Government

The Reserve Bank of India (RBI) has approved a record dividend transfer of Rs 2.69 lakh crore to the central government for the financial year 2024-25, surpassing previous payouts and budget estimates. This transfer, fueled by higher earnings from foreign exchange sales, bond gains, and effective liquidity management, offers the government the flexibility to reduce the fiscal deficit below the 4.4% target or increase spending as needed. The RBI raised its Contingent Risk Buffer from 6.5% to 7.5%, reflecting caution amid global uncertainties. Economists highlight that this historic surplus transfer, more than double the 2022-23 level, will ease fiscal pressures and help offset possible shortfalls in tax or divestment revenue. The decision was made during the 616th meeting of the RBI Central Board and is grounded in the revised Economic Capital Framework. The move strengthens the government's fiscal position while maintaining the RBI's risk provisions.