RBI Approves Record Rs 2.8 Lakh Crore Surplus Transfer to Govt Amid Credibility Concerns

New Delhi: The Reserve Bank of India's central board today announced a surplus transfer of Rs 2,86,588.46 crore to the government for the financial year of 2025-26.

The amount undershoots economists' expectations at a time when New Delhi would have been banking on this flow as it grapples with the crisis triggered by the US-Israel attack on Iran.

A Reuters poll of 25 economists taken on May 19 and 20 showed that the expectation was that the central bank would transfer ​a record dividend of Rs 2.9 lakh crore to Rs 3.2 lakh crore to the treasury, matching the ​government's forecast in this fiscal year's budget.

A section of the economists polled had noted that the government was becoming "⁠too reliant" on these transfers, which have surged 55-fold over the past two decades. A Reuters graph shows dramatic rise from 2023-24 onwards.

Last year’s transfer of Rs 2.69 lakh crore, for instance, was 27% higher than the previous year.

The RBI transfer is likely to come to the government's aid at a time when, as Economic Times notes, the benchmark 10-year bond yield has climbed about 50 basis points so far this year to 7.10% on Tuesday, while the rupee has weakened nearly 7%. The rupee is Asia's worst performing currency.

The Reuters poll ​has the fiscal deficit at 4.7% of gross domestic product this fiscal year, more than last year's 4.4% and above the government's 4.3% ‌target.

"The RBI surplus transfer is marginally lower than expected, thereby limiting the levers for the government in terms of managing the fiscal slippage risks," Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, is quoted by Reuters as having said.

Such transfers are unlikely to be anything more than temporary balms and "cannot be relied upon as a durable or consistent instrument of fiscal policy," as a National Institute of Public Finance and Policy paper by Vrinda Gupta notes.

For instance, between FY13 and FY19, as the fiscal deficit steadily declined from 4.9% to 3.4% of GDP, RBI dividends largely remained under Rs 70,000 crore, the paper says. Post-pandemic, this relationship between RBI transfers and the deficit have been even more disconnected, it says.

Writing in Mint earlier this month expecting another record RBI dividend, the economist Ajit Ranade cautioned that “once governments start depending on central bank transfers, subtle pressures arise: to maintain lower risk contingency buffers; to maximise profits via forex gains; to support government borrowing; and to optimise central bank profitability.” These, he argued, would undermine monetary credibility.

The RBI notification says that the 623rd meeting of its central board reviewed the global and domestic economic scenario, including risks to the outlook. It said that the gross income of the bank increased by 26.42% over the previous year while the expenditure before risk provisions increased by 27.60%. The net income, before risk provision and transfer to statutory funds, aggregated Rs 3,95,972.10 crore in FY 2025-26 as against Rs 3,13,455.77 crore in FY 2024-25. The Balance Sheet of the Bank expanded by 20.61% to Rs 91,97,121.08 crore as on March 31, 2026.

The board will maintain Rs 1,09,379.64 crore towards the contingent risk buffer, its financial safety net, for FY 2025-26 – a significant jump against Rs 44,861.70 crore in the previous year. It will maintain the buffer at 6.5% of the size of the RBI balance sheet, down from 7.5% in the previous year.

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