RBI Approves Record Dividend of Rs 2.87 Lakh Crore for Centre in FY26

Reserve Bank of India Approves Record Dividend of Rs 2.87 Lakh Crore for Centre

The Reserve Bank of India (RBI) has approved a record dividend of Rs 2.87 lakh crore to the Centre for the financial year 2026, providing a fiscal cushion to address the challenges arising from the ongoing Middle East crisis. This transfer of surplus is in line with the expectations of ICRA, which had forecast a dividend of Rs 2.9 lakh crore for the fiscal year.

The RBI's gross income increased by 26.42% over the previous year, while the expenditure before risk provisions increased by 27.6%. The bank's balance sheet expanded by 20.61% to Rs 91,97,121.08 crore as of March 31, 2026. 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.

The RBI lowered its contingency risk buffer 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.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

According to 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. However, the Centre's non-tax revenue is expected to be lower at Rs 6.66 lakh crore next fiscal, compared to Rs 6.67 lakh crore in 2025-26.

A Reuters poll has 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. The hefty dividend approved by the RBI would help government finances at a time when they are likely to come under pressure from the Iran war-led energy shock.

BMI, a Fitch company, 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.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline