New Delhi, May 26 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, adding that supported by a robust RBI dividend, system liquidity is likely to improve further.
This marks the third consecutive year where the actual dividend has exceeded the initial budgeted number. This implies an extra fiscal boost of 0.15 per cent of GDP.
Accordingly, “we maintain our FY26 gross FD/GDP target at 4.4 per cent, in line with the budget estimate,” according to the report by Emkay Global Financial Services.
“We expect Q1 FY26E to be in super surplus liquidity (with June tracking Rs 4-4.5 trillion), led by high RBI dividend of Rs 2.68 trillion and a sharp seasonal moderation in currency in circulation (CIC), along with RBI OMOs,” the report added.
The RBI has announced a record dividend of Rs 2.68 trillion to the Centre for FY25, which is around 28 per cent higher than the Rs 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, “we understand the bumper dividend is likely driven by higher gross FX sales of $398 billion in FY25 compared to $153 billion last year, which boosted foreign exchange income, increased interest income from G-secs, and lower provisioning for revaluation losses on assets, amid possible MTM (mark-to-market) gains on both foreign and domestic asset holdings,” the report explained.
These factors have also enabled the RBI to raise the CRB (contingent risk buffer) range and maintain the provisioning at the upper end of the revised band (7.5 per cent).
“We maintain that terminal policy rate could reach 5.25 per cent, while system liquidity will still end FY26 in a surplus of 0.9-1.1 per cent of Net demand and time liabilities (NDTL),” the report mentioned.
That said, improving transmission tools should help in better real sector percolation.
“We expect the 10Y yield to ease to 6.0 per cent by end-CY25, while the case of bull steepening bias will likely strengthen in the near term,” it added.
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