Reserve Bank of India (RBI) paid a dividend of Rs 87,416 crore to the Centre in FY23. In the next financial year, the dividend jumped 141% and reached Rs 2.11 lakh crore. Expert agencies are now suggesting that RBI could well repeat its dividend largesse to the Centre this year (FY25), thanks to the continuous decline in the value of the rupee against US dollar and RBI’s intervention in the market to arrest the decline.
Reports suggest that the nosedive of Indian rupee against US dollar could turn out to a boon for the Centre. Expert agencies are of the opinion that RBI is raking in huge profits from the sale of dollars and is likely to pay a hefty dividend to the government for the current financial year. While QuantEco Research has estimated that RBI could fork out a dividend of Rs 1.5 lakh crore in FY25, IDFC FIRST Bank has suggested that the payout will be in excess of Rs lakh crore in the current financial year.
FM under pressure to offer income tax relief to boost consumption
What’s significant is the timing of the dividend. It will be of big help at a time when Union finance Nirmala Sitharaman is facing huge pressure for providing income tax reliefs to provide higher disposable income at the hands of the common man in order to boost consumption in the country. The moot point is, if the finance minister is compelled to provide income tax sops, the government could face shortage of resources for infrastructure spending which it has to do not only for the sake of infrastructure but also to generate employment. Lacklustre capex by the private sector has added to the woes of the government.
RBI making big gains from dollar sale
IDFC First has stated that RBI has continued selling dollars to soften the decline of the rupee and in the April-November period in 2024 it sold $196 billion of forex (gross figures) compared to $113 billion in the 8-month period the year before. Reports stated that Standard Chartered experts estimated that the amount for full FY25 could approximate $250 billion.
“The RBI is expected to maintain elevated dividend levels, likely around two trillion rupees, supported by increased income from foreign exchange transactions as it sold more dollars to stabilize the rupee in 2HFY25,” ICICI Bank economists wrote in a note, reports said. “The RBI may choose to transfer a higher amount to reserves for contingency provisions, which would reduce the dividends available…Overall, we do not expect any major adverse impact on the RBI’s dividend transfer to the government, though the quantum should be lower,” Nomura Holdings economists wrote in a note. What is significant that the sale of dollars by RBI are supposed to fetch the central bank huge gains since they were acquired earlier at a much cheaper rate.
RBI data show that in September 2024, the RBI pool of dollars rose to $705 billion — a record. But subsequently, it has fallen to around $626 billion as RBI kept selling dollars to stem the fall of the value of the Indian currency.
RBI (Reserve Bank of India) took everyone by surprise last year when it paid a dividend of a whopping Rs 2.11 lakh crore to the government for FY24. Expert agencies are suggesting that the effort of the central bank to arrest the fall in the price of the rupee in the current year could also ensure a second year of dividend bonanza for the government. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
