The Reserve Bank of India may pay a whopping dividend of ₹3 trillion to the government on May 23 this year, according to a CNBC-TV18 poll of top economists. And a few who closely follow monetary and fiscal policy, including this writer, believe there is a good chance of the actual number being higher than our poll.
Here’s the math:
The RBI’s income includes:
- Profit from the sale of dollars
- Interest on foreign securities
- Interest on Indian govt bonds
- Profit on revaluation of gold
- Any valuation gains in securities held
From this, the central bank deducts:
- Its running expenses, which are not very much
- Mark-to-market losses on securities held
- Interest paid to banks on reverse repo and SDF deposits
- Any amounts to be transferred to the contingency buffer if it falls below the 5.5-6.5% mandated by the Jalan committee
Profit from the sale of dollars
This year, the profit from the sale of dollars is likely to be huge, because the RBI sold a great deal of dollars. From April 2024 to February 2025, data from RBI bulletins show the RBI sold $371.55 billion. An educated guess is that it sold a further $45 billion in March. This means RBI’s gross dollar sales in FY25 were a huge $415 billion compared to only $153 billion of gross sales in FY24.
Now, when the RBI sells dollars, it calculates its purchase price as the average price of all dollars bought historically. Economists say the historical price is probably around ₹78 per dollar. But the sale price would have been at least ₹84.5 per dollar. So, effectively, the central bank probably made a profit of ₹6.5 on every dollar sold. From a sale of $415 billion in FY25, the RBI probably made revenues of ₹2.7 trillion.
Income from foreign securities
Another big part of the RBI’s income comes from its hefty foreign currency holdings. These are held in the form of US bonds and treasuries, with a bit in the form of Euro, Swiss and Yen bonds. RBI data shows that the rupee value of foreign securities as of March 31, 2025, was around ₹48.6 trillion. The average interest rate of the Fed remained between 4.33% and 5.33% in FY25. Assuming the central bank earned even a 3% average on a bond portfolio of ₹48.6 trillion, its interest earned works to ₹1.5 trillion.
Of course, since one doesn’t know the maturity of the RBI’s bond investments, the actual income may be lower due to mark-to-market losses. Given that there wasn’t much change in the total amount of foreign securities held between FY24 and FY25, the income from interest on foreign securities would have been similar in both years.
Income from domestic government bond holdings
RBI data shows its stock of government securities rose from ₹13.6 trillion as of March 2024 to ₹15.6 trillion. But average interest yield on incremental purchases was lower in FY25 due to rate cuts by the RBI, though the central bank may have made mark-to-market gains.
Income from the revaluation of gold assets
The sharp rise in the price of gold from $2,345 per ounce as of March 31, 2024, to $3,045 per ounce as of March 31, 2025. RBI data, hence, shows that the central bank’s gold assets rose from ₹4.4 trillion to ₹6.6 trillion over the same period, which means a gain of ₹2.2 trillion, but this may simply go to the revaluation reserve (or the Currency and Gold Revaluation Account (CGRA)) and not impact income.
In short, while the RBI’s interest income in FY25 may remain similar to that in FY24 at ₹1.9 trillion, its other income from dollar sales may be a good ₹1.5 trillion more than its income last year.
The expenditures
On the expenditure side, a big unknown is how much the RBI transfers to the contingency buffer. Last year, it transferred ₹42,819 crore versus ₹1.48 trillion in FY23.
The Jalan committee had mandated a contingency buffer of 5.5-6.5% of the balance sheet. The central bank was mandated to review its Economic Capital framework.
If the RBI sticks to the Jalan committee contingency buffer of 5.5-6.5% and makes no significant extra provision to the contingency fund, it can even declare a surplus of ₹4 trillion. At any rate, an upside surprise to the ₹3 trillion dividend thrown up by the CNBC-TV18 poll looks likely.
There is another political reason for a higher dividend from the RBI.
The government budgeted only ₹2.56 trillion in income from the RBI and PSU banks. But the warlike conditions that erupted lately are already reported to have increased the government’s defence expenses. CNBC-TV18 reported that the defence expenditure, which was budgeted at ₹6.8 trillion, may rise to over ₹7 trillion due to higher replenishment orders.
Finally, one economic reason why the RBI may want to flinch from a high dividend (which is a form of monetisation of the deficit) is if inflation is high. With CPI inflation estimated to be below the mandated 4% mark in the current year, the central bank may be comfortable with a higher monetisation of the deficit this year.
That’s two more good reasons why the RBI dividend may surprise on the upside.