The incremental gain from the higher RBI dividend is expected to partly offset potential shortfalls in tax revenues and nominal GDP growth, a report said on Monday. It added that supported by a robust RBI dividend, system liquidity is likely to improve further.
This marks the third consecutive year in which the actual dividend has exceeded the initial budgeted figure, implying an additional fiscal boost of 0.15 per cent of GDP.
Accordingly, &ldquo;we maintain our FY26 gross FD/GDP target at 4.4 per cent, in line with the budget estimate,&rdquo; said the report by Emkay Global Financial Services.
&ldquo;We expect Q1 FY26E to reflect super surplus liquidity (with June tracking ₹4&ndash;4.5 trillion), led by the high RBI dividend of ₹2.68 trillion and a sharp seasonal moderation in currency in circulation (CIC), along with RBI open market operations (OMOs),&rdquo; the report added.
The RBI has announced a record dividend of ₹2.68 trillion to the Centre for FY25, around 28 per cent higher than the ₹2.1 trillion assumed in the FY26 Union Budget.
While the annual report is yet to be released, which will provide detailed insights into the balance sheet, &ldquo;we understand the bumper dividend is likely driven by higher gross foreign exchange sales of $398 billion in FY25 compared to $153 billion last year, which boosted foreign exchange income, increased interest income from government securities (G-secs), and lower provisioning for revaluation losses on assets, amid possible mark-to-market (MTM) gains on both foreign and domestic asset holdings,&rdquo; the report explained.
These factors have also enabled the RBI to raise the Contingent Risk Buffer (CRB) range and maintain provisioning at the upper end of the revised band (7.5 per cent).
&ldquo;We maintain that the terminal policy rate could reach 5.25 per cent, while system liquidity will still end FY26 in a surplus of 0.9&ndash;1.1 per cent of Net Demand and Time Liabilities (NDTL),&rdquo; the report noted.
That said, improving transmission tools should aid better percolation into the real sector.
&ldquo;We expect the 10-year yield to ease to 6.0 per cent by end-CY25, while the case for a bull steepening bias will likely strengthen in the near term,&rdquo; it added.
&mdash;IANS

India's manufacturing unit and service sector (image source social media)

Record RBI dividend expected to offset revenue shortfall and improve FY26 system liquidity

RBI Dividend Boosts Liquidity, Aids Fiscal Position

Record RBI dividend expected to offset revenue shortfall and improve FY26 system liquidity

May 26, 2025 | 17:41 IST