The Reserve Bank of India (RBI) has approved to give a dividend (profit share) of ₹ 2,86,588.46 crore to the Central Government for the financial year 2025-26. This decision was taken in the Central Board meeting of RBI on Friday. This is the largest dividend payment ever. Last year, RBI had given dividend of ₹2.69 lakh crore, 27% more than ₹2.11 lakh crore. This time the amount is about 7% more than the previous record. The government got a security cover amid the Middle East crisis. Due to the ongoing tension in the Middle East, crude oil prices remain unstable in the global market. India imports most of the oil it needs, which is increasing the burden on the government exchequer. In such a situation, this huge amount received from RBI will act as a security shield for the central government. This will help the government to handle the increasing expenses on subsidy on fertilizers and fuel. RBI’s earnings increased by 26%, balance sheet crossed ₹91 lakh crore. The Reserve Bank said that its total earnings have increased by about 26% compared to last year. However, the bank’s expenses have also increased by about 28%. RBI’s balance sheet has now increased by 20% to about ₹92 lakh crore. If we talk about the bank’s net profit (before setting aside any risk funds), this year RBI has earned ₹3.95 lakh crore, which is much higher than last year’s ₹3.13 lakh crore. Reduction in risk buffer, so that the government can get more money. This time RBI has decided to make a slight cut in its ‘Emergency Fund’ (Contingency Risk Buffer). This is the money that the Reserve Bank keeps safe to deal with any sudden economic crisis or market fluctuations. Earlier RBI used to keep 7.5% of its total assets (balance sheet) in this fund, which has now been reduced to 6.5%. Since the bank put less money in its emergency fund, it was left with more savings (surplus), which it gave to the government. This is the reason why there has been such a huge increase in the money received by the government this year. Let’s understand this with an example: Suppose your earning is ₹100 and you used to put ₹7.50 in ‘Emergency Piggy Bank’ every month. This month you decide to put only ₹6.50 in your piggy bank. By doing this, ₹ 1 extra was saved in your pocket. RBI also did the same, due to which it accumulated more money to give to the government. It will be easier to control the budget deficit. According to Aditi Nair, chief economist of rating agency ICRA, this dividend of RBI is in line with her expectations. However, the government’s fiscal deficit may remain under pressure due to fertilizer and fuel subsidies. Nair has estimated that in case of average crude oil price of $95 per barrel, the government’s fiscal deficit for FY 2027 could be 40 basis points more than the target of 4.3% of GDP. The huge dividend will help keep this loss low. Impact of Middle East War on India: Bond yield increased. Due to Iran war, the interest yield on India’s government bonds (government investment scheme) has increased by 0.40%. The effect of this was that now it has become very expensive for companies to take loans from the market, which is at the highest level in the last several years. This crisis is having the worst impact on India because we buy most of the oil we need from other countries. However, to protect the general public from inflation, the government has currently put a ban on increasing the prices of petrol and diesel, so that the oil companies do not increase the prices immediately. Benchmark Bond Yield It is a kind of meter which shows how expensive or cheap the money is in the market. Its increase means that now banks and companies will have to pay more interest to borrow money. What is dividend? Just like when a company makes profit, it distributes money to its owners or shareholders, similarly, RBI, after deducting expenses and necessary reserve funds from its earnings for the year, hands over the remaining money to the government. This is called ‘surplus’ or ‘dividend’.
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RBI will give dividend of ₹2.87 lakh crore to the government: 7% increase from last year; Treasury will get big relief amid Iran-Israel crisis
