RBI’s Rs 2.69 lakh cr dividend to ease fiscal deficit by 20 bps;

The Reserve Bank of India (RBI) has transferred its highest-ever dividend of Rs 2.69 lakh crore to the Government of India for the financial year 2024–25. Following this, analysts at SBI expect the fiscal deficit to ease by 20 to 30 basis points from the budgeted level, potentially bringing it down to 4.2% of GDP. Alternatively, they anticipate that the government might choose to increase spending by around Rs 70,000 crore. The Union Budget had projected income of approximately Rs 2.56 lakh crore from the RBI and other financial institutions. With the RBI alone contributing nearly Rs 2.7 lakh crore, the government now has more fiscal room than originally estimated. This marks the third consecutive year in which the actual dividend has exceeded the budgeted estimate. This record dividend represents a 27.4% increase from last year’s transfer of Rs 2.11 lakh crore, reflecting the central bank’s stronger financial performance in FY25.According to Emkay Global Financial Services, this increased dividend implies an extra fiscal boost of 0.15% of GDP. However, despite the higher-than-expected transfer, analysts do not anticipate a major revision to the Centre’s fiscal roadmap, as the gain is likely to partly offset potential shortfalls in tax revenues and slower nominal GDP growth. “As of now, we do not expect fiscal math to change drastically because of this. The incremental gain from the higher RBI dividend is expected to partly offset potential shortfalls in tax revenues and lower-than-expected nominal GDP growth. Accordingly, we maintain our FY26 gross fiscal deficit-to-GDP target at 4.4%, in line with the budget estimate,” Emkay said. Research experts at Emkay Global Financial Services expect the 10-year government bond yield to ease to 6.0% by the end of calendar year 2025, with a likely strengthening of the bull steepening bias in the near term. This anticipated decline in yields comes despite expectations of a liquidity deluge in the coming months. Analysts believe this surplus liquidity will not derail a potential rate cut in June or affect the depth of the easing cycle.