A higher dividend target of Rs 70,000 cr from RBI, banks may help Budget math

The government is anticipating collecting approximately Rs 70,000 crore from the central bank and financial institutions (FIs) in the upcoming fiscal year, after benefiting greatly from the Reserve Bank’s dividends in the current fiscal year.

According to reports, the government would set the earnings from financial institution dividends at a far higher level than the Rs 48,000 crore projected for the current fiscal year in the interim budget, which Finance Minister Nirmala Sitharaman is expected to present to the Lok Sabha on February 1.

Because of the RBI’s payment of Rs 87,416 crore in dividends, the current financial year projection has already surpassed the budget target. Public sector banks and financial institutions will pay out more dividends in the upcoming year than they did in the current one since they produced strong quarterly results during the current fiscal year.

According to reports, it would be reasonable to anticipate that the RBI and financial institutions would pay out roughly Rs 70,000 crore in dividends in FY’25. In 2023–24, the government set aside Rs 48,000 crore, a 17% increase in dividends from public sector banks, financial institutions, and the Reserve Bank of India (RBI).

However, the Reserve Bank’s distribution of Rs 87,416 crore in surplus to the federal government for 2022–2023 greatly exceeded this goal. The Reserve Bank of India transferred a surplus of Rs 87,416.22 crore to the central government in 2023–24. This amount is greater than the Rs 30,307.45 crore transferred the previous year and the Rs 48,000 crore budgeted amount under the Dividend/Surplus transfer of Reserve Bank of India, Nationalized Banks, and Financial Institutions in the Union Budget 2023–24.

The government obtained Rs 40,953 crore from the RBI and public sector financial institutions during the preceding fiscal year. In addition to increased revenue mobilization, the larger dividend from banks and other financial institutions would aid in the achievement of a glide path for the budget deficit.

The government intends to lower the fiscal deficit from an anticipated 5.9 percent of GDP in 2023–2024 to below 4.5% by 2025–2026 in accordance with the fiscal consolidation plan. According to the roadmap, the government must reduce the fiscal deficit to 5.4% of GDP in the upcoming fiscal year, which starts on April 1, 2024.

(With agency inputs)