Capitalmind MF CEO Criticizes RBI's Massive Dividend Distribution

RBI's Surplus Transfer to Government Falls Short of Expectations

The Reserve Bank of India's (RBI) decision to transfer a record surplus of Rs 2,86,588.46 crore to the central government for the financial year ended March 2026 has been met with criticism from Deepak Shenoy, founder and chief executive officer of Capitalmind Mutual Fund.

The RBI's announcement, made on Friday, follows a record profit of Rs 3.96 lakh crore for FY26, which is a 26.5% increase from the previous financial year. However, the payout of Rs 2,86,588.46 crore is lower than expected, despite the central bank reporting a significant increase in its Contingent Risk Buffer (CRB) allocation.

According to Shenoy, the RBI retained a substantial portion of its earnings by increasing allocations to its CRB, which now stands at 6.5% of its balance sheet. Shenoy questioned the need for maintaining a large balance sheet and suggested that the RBI could unlock additional value by reducing its gold holdings.

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The RBI's decision to maintain a large balance sheet has been a point of contention, with Shenoy suggesting that the central bank could sell its gold holdings to reduce its balance sheet size and return even more to the government. The RBI's official reason for maintaining a large balance sheet is to maintain a 6.5% buffer.

The RBI's surplus transfer is expected to provide a major fiscal cushion to the government at a time when higher crude oil prices, rising fertiliser costs, and supply chain disruptions linked to the West Asia conflict are increasing pressure on public finances. The payout accounts for nearly 91% of the government's budgeted non-tax revenue under the "dividend/surplus of RBI, nationalised banks and financial institutions" category for FY27.

The RBI's decision was approved at the 623rd meeting of the RBI's Central Board, chaired by Governor Sanjay Malhotra. The central bank said it transferred Rs 1,09,379.64 crore towards the CRB in FY26, more than double the Rs 44,861.70 crore transferred in the previous year.

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Public sector banks posted a combined net profit of Rs 1.98 lakh crore in FY26, up 11.1% from the previous year, marking the fourth consecutive year of aggregate profitability for government-owned lenders. Dividend inflows from public sector banks are also expected to exceed budget estimates after state-owned lenders reported record profitability.