RBI's Record Dividend to the Government

The Reserve Bank of India (RBI) transferred a record dividend of Rs 2.87 lakh crore to the Centre for the fiscal year 2025-26. This significant transfer stems from the RBI's obligation to hand over its entire profit to the government, unlike companies that only transfer a portion to shareholders.

Income and Expenditure Analysis

• The RBI's total income in 2025-26 was Rs 4.28 lakh crore, a 26% increase from the previous year.
• Expenditure was approximately Rs 1.41 lakh crore.

Sources of Income

• Forex Transactions: The RBI sold $195 billion of foreign currency, generating an 'exchange gain from foreign exchange transactions' of Rs 1.69 lakh crore, which is 52% higher than in 2024-25.
• Interest from Bonds: Purchases of central government bonds contributed Rs 1.18 lakh crore in interest.
• Interest on Foreign Securities: Income rose 11% to Rs 1.08 lakh crore.
• Interest on Foreign Deposits: Yielded Rs 27,407 crore.

Expenditure Breakdown

• Currency printing costs were Rs 4,875 crore.
• Employee costs increased by 11% to Rs 10,136 crore.
• Provisions: Significant expenditure of Rs 1.09 lakh crore due to: 
  • Falling value of domestic and foreign securities.
  • Losses on forward contracts used for rupee defense.
  • The Contingent Risk Buffer reduced to 6.5% from 7.5%, containing the provision amount.

Rupee Defense and its Consequences

The RBI's actions to defend the rupee involved selling foreign currency, which reduced rupee liquidity. To counteract this, the RBI infused liquidity by purchasing government bonds and conducting short-term operations, affecting market interest rates.