Fiscal Bonanza

RBI dividend cushion will help the govt to front-load expenditure to keep the economic momentum going

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The Reserve Bank of India's (RBI) decision to transfer ₹2.69 lakh crore to the government by way of dividends for FY25 might have undershot the market's expectations but is a decent 27% jump over the ₹2.1 lakh crore in FY25. The gap between the market's expectations and the dividend can be explained in the RBI's prudent move to maintain the contingent risk buffer (CRB) at a higher 7.5%. That's at the higher end of the range, prescribed in the revised Economic Capital Framework (ECF). The panel, which reviewed the earlier framework, has decided that the buffer, which provides for monetary and financial stability risks, credit risk, and operational risk, should be maintained within a range of 6.0 ± 1.5% of the balance sheet. The Jalan panel, it may be recalled, had required the RBI to maintain the buffer at 5.5-6.5% of the balance sheet; in FY24 it was maintained at 6.5%, higher than the 6% in the previous year. In today's hig