Expect High Dividend Payments By RBI To Govt To Continue: SBI Research

After RBI paid an unexpectedly high dividend to the central government the last financial year, it is now expected that higher dividend payments could continue in the current year too.

A report put out by SBI Research authored by Soumya Kanti Ghosh, Group Chief Economic Adviser, asserted the possible high dividend payments in 2024-25 are likely due to high US bond yields, income boost at RBI, and high foreign exchange reserves.

In 2023-24, a bumper Rs 2.11 trillion dividend was transferred by the Reserve Bank of India (RBI) to the government. It was higher than the government's budget estimate of about Rs 1 trillion, as against Rs 87,416 crore paid in 2022-23.

"...there is a large probability of RBI dividend being healthy in FY25 as well and may even be closer to Rs 2.1 trillion," said the research report.

RBI reported a 141 per cent rise in its net income last fiscal, paving the way for the announcement of a record dividend.

Further, the firm dividend payout is expected to help the government achieve its fiscal deficit target of 5.1 per cent of GDP in 2024-25.

The government, under its fiscal glide path, aims to reduce the fiscal deficit to 4.5 per cent by 2025-26.

The Interim Budget for 2024-25 tabled in Parliament on February 1 pegged the fiscal deficit target at 5.1 per cent.
In 2023-24, the government had pegged the fiscal deficit target for 2023-24 at 5.9 per cent of gross domestic product (GDP).

Fiscal deficit data for 2023-24 is expected to be released later today. The difference between total revenue and total expenditure of the government is termed a fiscal deficit. It is an indication of the total borrowings that may be needed by the government.

"Higher dividend payments might continue in 2024-25 also indicating adherence to fiscal glide path of 4.5 per cent by 2025-26," said the SBI Research report. (ANI)