RBI dividend boosts fiscal position by 0.15%

New Delhi

A report from Emkay Global Financial Services says the Reserve Bank of India's (RBI) record dividend will give the government’s finances an extra push. This bonus will help cover lower tax revenues and slower economic growth.

The RBI announced a huge dividend of Rs 2.68 trillion for FY25, 28% higher than what the Union Budget had expected. This will provide a fiscal boost equal to 0.15% of GDP. It’s the third year in a row the actual RBI dividend has been higher than expected.

Emkay expects the fiscal deficit for FY26 to stay at 4.4% of GDP, matching the budget estimate. The report also predicts a strong surplus in liquidity during the first quarter, especially in June, with about Rs 4 to 4.5 trillion in surplus funds.

This extra money comes from higher foreign exchange sales, more income from government bonds, and fewer losses on asset revaluation. These gains allowed the RBI to raise its risk reserves to the top of its target range.

Because of this, the banking system is expected to remain in surplus through FY26. Emkay projects that interest rates will peak at 5.25%, while system liquidity will stay healthy, equal to 0.9–1.1% of banks' total deposits.

The report also sees long-term interest rates easing. The 10-year bond yield may fall to 6.0% by the end of 2025. With better policy tools, the benefit of these gains should flow more smoothly into the real economy, supporting growth and stability.