RBI's bumper dividend to ease fiscal situation for FY26, could even push fiscal deficit lower: Economists

RBI delivers another bonus dividend to the government

The bumper dividend of Rs 2.69 lakh crore announced by Reserve Bank of India will help ease the fiscal situation helping the government better its deficit target of 4.4 percent set for the year, economists said on May 23.

“The Union Budget for 2025-26 has projected a dividend income of Rs 2.56 lakh crore from the Reserve Bank and public sector financial institutions. With today’s transfer, this number would be much higher than the budgeted. We expect fiscal deficit to ease by 20 to 30 bps from the budgeted level to 4.2 percent of GDP. Alternatively it will open up for additional spending,” said Soumya Kanti Ghosh, chief economic advisor, SBI.

The dividend stands 27 percent over the previous year’s transfer of Rs 2.11 lakh crore, which had helped government to achieve fiscal deficit target despite slippages on divestment front.

“This is also ~Rs 0.4-0.5 (lakh crore) trillion (equivalent to 11-14 bps of GDP) higher than the amount that was likely assumed in the FY2026 Union Budget, implying an equivalent upside to non-tax revenues, which would provide some buffer to make up for a miss in taxes or disinvestment receipts, or higher-than-budgeted expenditure in the fiscal,” said Aditi Nayar, chief economist, Icra.

This marks the second consecutive year when the government has received over Rs 2 lakh crore dividend from the central bank.

Economists note that forex sales coupled with higher interest income from government securities could be reasons for better surplus from the Reserve Bank of India.

“While the annual report is yet to be released for us to get the details of the balance sheet, we understand the bumper dividend is likely driven by (1) higher gross FX sale of ~$398bn in FY25 vs $153bn last year boosting foreign income, (2) higher interest income from G-secs, and (3) lower provisioning for revaluation losses on assets amidst possible MTM gains on their foreign and domestic asset holdings,” said Madhavi Arora, chief economist, Emkay Financial.

While the government had missed its capex target of the previous year, it will plan to meet the target this year in a world beset with uncertainty and when private sector capex is expected to dip again.

The capex target for this year was raised to Rs 11.2 lakh crore only slightly higher than the previous year’s budget estimate of Rs 11.1 lakh crore.

Lower capex is expected to dent India’s growth prospects, which have already been hindered by global uncertainty.

In its forecast released last month, International Monetary Fund lowered India’s FY26 growth forecast to 6.3 percent compared with 6.5 percent projected in January.