News: The Reserve Bank of India (RBI) recorded a historic surplus of ₹2.69 lakh crore for the financial year 2024-25, the highest ever dividend payout to the central government. RBI Dividend
About RBI Dividend
- The RBI dividend refers to the annual surplus or profit that the Reserve Bank of India (RBI) transfers to the Central Government. This surplus arises from the RBI’s various operations and is transferred under a set mechanism called the Economic Capital Framework (ECF).
- It is not a tax, but a non-tax revenue for the government.
- The dividend helps the central government meet its fiscal needs, including managing its budget deficit and spending requirements.
- The transfer amount is determined after the RBI sets aside provisions to maintain its financial strength and absorb risks—especially via the Contingent Risk Buffer (CRB).
Why Did RBI Earn a Higher Surplus in 2024-25?
- 1. Higher Interest Income: The RBI earns substantial interest from its holdings of government securities (like bonds and treasury bills), both domestic and foreign. In FY25, elevated interest rates globally led to higher returns on these securities.
- 2. Strong Gains from Foreign Exchange Operations: The RBI was the top seller of foreign exchange reserves in January 2025 among Asian central banks. Profits from selling dollars at higher rates due to forex market volatility contributed significantly.
- 3. Increased Gold Holdings and Rising Gold Prices: The RBI expanded its gold reserves, and with global gold prices surging, this added to capital gains in its asset portfolio.
- 4. Liquidity Management and LAF Operations: The RBI earns interest from liquidity adjustment facility (LAF) operations like repo and reverse repo transactions with banks. Active liquidity management during market fluctuations increased income from these operations.
- 5. Seigniorage from Currency Issuance: Income from issuing currency (seigniorage) also added to the surplus. This is the difference between the cost of printing currency and its face value.
- 6. Efficient Expense Management: The RBI managed its operating costs effectively, ensuring that more of the gross income translated into net surplus.
