Dividend from RBI in FY25 may fetch govt Rs 75K-85K cr

The central bank’s income is expected to be supported from interest income on foreign securities and rupee securities in FY24, said the report. (Reuters)

The Central government is likely to earn Rs 75,000-85,000 crore as dividends from the Reserve Bank of India (RBI) in the current financial year, slightly lower than Rs 87,416 crore surplus transfer in FY24, a report by IDFC FIRST Bank said on Friday.

For FY25, the Centre has budgeted a surplus transfer of Rs 1.02 trillion from the RBI and public sector banks (PSBs), but has not provided any breakup. The expected dividend transfer from the RBI will be for FY24, but will be reflected in the government’s account for FY25.

The central bank’s income is expected to be supported from interest income on foreign securities and rupee securities in FY24, said the report. Meanwhile, earnings on foreign exchange transactions are expected to be lower with gross dollar sales tracking at $151.4 billion in FYTD24 (till Feb) versus  $206.4bn in FYTD23 (till Feb), it said.

“Historical cost of dollar purchase is tracking at 64.9, substantially below the current spot rate. Hence, despite lower quantum of gross dollar sales in FY24, revenues from forex transactions will be substantial (though lower than last year),” the report said, while adding that FY24 RBI balance sheet expansion was led by accumulation of FX reserves.

The expansion of RBI’s balance sheet in FY24 was led by foreign currency assets (up 13.8% y-o-y), loans and advances to schedule commercial banks (136% y-o-y) and gold reserves (17.1% y-o-y). The rise in forex reserves (foreign currency asset) was driven by forex purchases which accounted for 70% of the increase, followed by revaluation gain, the report highlighted.

On the liabilities side, the increase in the RBI balance sheet was led by currency, SCB deposit, and other deposits. Currency accounts for 49% share of total assets/liabilities in FY24, which is lower than 53% in FY23.

As a percentage of GDP, RBI balance sheet size has risen to 24.1% in FY24 versus 23.5% in FY23. There has been a normalisation in RBI balance sheet size from Covid-19 peak of 28.6% in FY21. “In FY25, we expect RBI balance sheet size to growth at a similar pace as nominal GDP, maintaining the ratio at 24%,” stated the report.