22/05/26, 2.87Lac crore to Centre Govt

The Reserve Bank of India on May 22 approved a record dividend of Rs 2.87 lakh crore to Centre for FY26, which would provide the Centre with a fiscal cushion to address challenges arising from the ongoing Middle East crisis.

"The Central Board approved the transfer of surplus of Rs 2,86,588.46 crore to the Central Government for the accounting year 2025-26," said RBI in a statement.

The gross income of RBI increased by 26.42% over the previous year while the expenditure before risk provisions increased by 27.6%.

"The Balance Sheet of the Bank expanded by 20.61% to Rs 91,97,121.08 crore as on March 31, 2026," added RBI.

The gross income of RBI increased by 26.42% over the previous year while the expenditure before risk provisions increased by 27.6%. "The net income, before risk provision and transfer to statutory funds, aggregated Rs 3,95,972.10 crore in FY26 as against Rs 3,13,455.77 crore in FY25," said RBI.

As per the Budget documents, the Centre expects Rs 3.16 lakh crore in dividends and surpluses from the Reserve Bank of India, nationalised banks, and financial institutions in 2026-27.

The RBI lowered its contingency risk buffer - funds kept aside to protect the central bank's finances from volatility - to 6.5% of its balance sheet from 7.5% in the previous year.

The transferable surplus for any financial year is arrived at on the basis of the revised Economic Capital Framework (ECF) as approved by the Central Board of the RBI.

"The RBI's dividend to the Government of India, at Rs 2.9 lakh crore, is in line with ICRA's expectations for the fiscal and around 7% higher than last year's level. As compared to the Budget Estimates, the fiscal is expected to remain under pressure owing to expectations of higher fertiliser and fuel subsidy requirements, and lower tax collections and OMC dividends. While the Economic Stabilisation Fund and customs duty hikes on gold and silver imports are likely to provide some cushion, we expect the GoI to exceed the budgeted fiscal deficit target for FY27 of 4.3% of GDP by 40 bps, assuming an average crude oil price of $95/barrel in the fiscal," said Aditi Nayar, chief economist, ICRA.

Last year, the RBI made a record dividend payout of Rs 2.69 lakh crore to the central government for 2024-25, 27% higher than Rs 2.11 lakh crore transferred in the previous year.

Dividend and Reserve Bank's surplus transfers fall under the non-tax revenue category.

In all, the Centre expects Rs 6.66 lakh crore as non-tax revenue next fiscal, lower than 6.67 lakh crore in 2025-26.

The revenue from taxes has been pegged at Rs 28.66 lakh crore, up 7.18% from Rs 26.74 lakh crore in 2025-26.

A Reuters poll pegged the fiscal deficit at 4.7% of gross domestic product this fiscal year, more than last year's 4.4% and above the government's 4.3% target. Some economists say the deficit could rise to as much as 5% of GDP.

A hefty dividend would help government finances at a time when they are likely to come under pressure from the Iran war-led energy shock, traders said.

"The RBI surplus transfer is marginally lower than expected, thereby limiting the levers for the government in terms of managing the fiscal slippage risks. While we do not see extra borrowing risks for now, we continue to monitor the extent of subsidy and tax growth slowdown," said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank

BMI, a Fitch company, said it is maintaining its forecast for the federal government's fiscal deficit at 4.5% of GDP, above the government's 4.3% target, while flagging increased upside risks.

India's 10-year bond yield has risen about 40 basis points since the start of the Iran war, with a knock-on impact on corporate debt yields, which have risen to multi-year highs, prompting firms to turn to floating-rate bonds.z

India is among the worst affected nations from the Middle East crisis as it relies heavily on oil imports, and the government has restrained state-run retailers from raising prices to match the increase in global crude for fear of triggering an inflation spiral.

The central bank makes an annual transfer to the government from surplus income generated through investment earnings, valuation gains on foreign exchange holdings including the dollar, and fees from printing currency notes.

Report by J. Jagsnath for Network18 with  inputs from agencies