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2 Feb 2026·Source: The Indian Express
4 min
EconomyNEWS

RBI Dividend, Disinvestment Target: ₹80,000 Cr Boost Expected in FY27

Government anticipates significant boost from RBI dividend and disinvestment proceeds in FY27.

The government expects another substantial dividend from the RBI in FY27, along with disinvestment proceeds estimated at ₹80,000 crore. This additional income is crucial for managing the fiscal deficit and funding various government programs. Higher-than-expected dividends from the RBI and successful disinvestment can provide fiscal space for increased spending or further deficit reduction. The disinvestment target reflects the government's ongoing efforts to monetize assets and improve efficiency.

Key Facts

1.

FY27 disinvestment target: ₹80,000 crore

2.

Expected bumper RBI dividend

UPSC Exam Angles

1.

GS Paper 3 (Economy): Government Budgeting, Fiscal Policy

2.

Connects to syllabus topics like Public Finance, Resource Mobilization

3.

Potential question types: Statement-based, Analytical

Visual Insights

FY27 Fiscal Boost: RBI Dividend & Disinvestment Target

Key fiscal figures expected in FY27, impacting government finances and economic policy.

Disinvestment Target
₹80,000 Cr

Funds generated from disinvestment can be used to reduce fiscal deficit or finance infrastructure projects.

Expected RBI Dividend
Substantial

RBI dividend contributes to the government's non-tax revenue, aiding in fiscal management.

More Information

Background

The Reserve Bank of India (RBI) plays a crucial role in managing the Indian economy, including transferring surplus profits to the government. This practice has historical roots, dating back to the establishment of the RBI in 1935 under the RBI Act, 1934. Initially, the RBI was a private entity but was nationalized in 1949, solidifying its role as the central bank of India. The transfer of surplus from the RBI to the government is governed by Section 47 of the RBI Act. The amount transferred depends on the RBI's income, expenditure, and provisions for various contingencies. Over the years, the quantum of these transfers has varied significantly, influenced by factors such as interest rates, exchange rates, and the RBI's operational efficiency. The Bimal Jalan Committee in 2019 reviewed the RBI's capital framework and recommended a revised economic capital framework, which impacts the amount of surplus transferred to the government. Disinvestment, another key aspect mentioned in the news, is the process where the government sells its stake in public sector undertakings (PSUs). This has been a part of India's economic policy since the early 1990s, following the liberalization reforms. The objectives of disinvestment include reducing the fiscal burden on the government, improving the efficiency of PSUs, and raising resources for various developmental programs. The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is responsible for managing the government's disinvestment program.

Latest Developments

In recent years, the government has increasingly relied on dividends from the RBI and disinvestment proceeds to manage its fiscal deficit. Higher-than-expected dividends from the RBI can provide a significant boost to government revenues, allowing for increased spending on infrastructure, social programs, or further deficit reduction. The size of the RBI dividend is often a subject of debate, with some economists arguing that the RBI should retain more profits to strengthen its balance sheet. The government's disinvestment program has also seen mixed success. While some PSUs have been successfully privatized, others have faced challenges due to market conditions, regulatory hurdles, or valuation issues. The government has set ambitious disinvestment targets in recent budgets, reflecting its commitment to monetizing assets and improving the efficiency of PSUs. The strategic sale of Air India in 2021 was a significant achievement in this regard. Looking ahead, the government is expected to continue its focus on both RBI dividends and disinvestment to support its fiscal position. The ₹80,000 crore disinvestment target for FY27 indicates the government's ongoing efforts to raise resources through asset sales. However, achieving these targets will depend on various factors, including market sentiment, investor appetite, and the government's ability to address regulatory and procedural challenges. The Union Budget will likely continue to emphasize these revenue streams as key components of the government's fiscal strategy.

Frequently Asked Questions

1. What is the expected disinvestment target for FY27, and why is it important for the government?

The disinvestment target for FY27 is ₹80,000 crore. This is crucial for managing the fiscal deficit and funding various government programs.

2. Explain the role of RBI dividends in government finances. Why is it important?

RBI dividends provide a significant boost to government revenues, allowing for increased spending on infrastructure, social programs, or further deficit reduction. Higher-than-expected dividends can provide fiscal space for the government.

3. How might the government use the additional income from RBI dividends and disinvestment?

The government can use this additional income for increased spending on infrastructure, social programs, or further deficit reduction. It provides fiscal space for various initiatives.

4. What is 'disinvestment' in the context of the Indian economy?

Disinvestment refers to the government selling its stake in Public Sector Undertakings (PSUs) or other assets. The disinvestment target reflects the government's ongoing efforts to monetize assets and improve efficiency.

5. Why are RBI dividends and disinvestment proceeds in the news recently?

These are in the news because the government expects a substantial dividend from the RBI in FY27, along with significant disinvestment proceeds. This is crucial for managing the fiscal deficit.

6. What are the potential benefits and risks of the government relying heavily on RBI dividends and disinvestment?

Benefits include increased fiscal space for spending or deficit reduction. Risks include uncertainty in dividend amounts and market volatility affecting disinvestment proceeds.

7. How does the RBI Act, 1934 relate to the current discussion on RBI dividends?

The RBI Act, 1934 provides the legal framework under which the RBI operates, including the provisions related to transferring surplus profits to the government.

8. What are the key facts to remember regarding the FY27 disinvestment target for the UPSC Prelims exam?

The key fact is the target amount: ₹80,000 crore. Remember that this is a target and actual proceeds may vary.

9. In your opinion, what reforms are needed to make the disinvestment process more efficient and transparent?

While specific reforms are not mentioned in the provided data, generally, streamlining procedures, ensuring fair valuation, and enhancing transparency are crucial for efficient disinvestment.

10. How does a higher-than-expected RBI dividend impact common citizens?

Higher dividends can enable the government to fund social programs or infrastructure projects, potentially benefiting common citizens through improved services and economic growth.

Practice Questions (MCQs)

1. Consider the following statements regarding the Reserve Bank of India (RBI): 1. The RBI was established in 1935 based on the recommendations of the Hilton Young Commission. 2. Section 47 of the RBI Act, 1934 governs the transfer of surplus profits from the RBI to the central government. 3. The Bimal Jalan Committee was constituted to review the RBI's monetary policy framework. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.2 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: A

Statement 1 is CORRECT: The RBI was indeed established in 1935 based on the recommendations of the Hilton Young Commission, also known as the Royal Commission on Indian Currency and Finance. Statement 2 is CORRECT: Section 47 of the RBI Act, 1934, governs the transfer of surplus profits from the RBI to the central government. Statement 3 is INCORRECT: The Bimal Jalan Committee was constituted to review the RBI's ECONOMIC capital framework, not the monetary policy framework. The committee's recommendations influenced the amount of surplus transferred to the government.

2. With reference to disinvestment in India, consider the following statements: 1. Disinvestment aims to reduce the fiscal burden on the government and improve the efficiency of Public Sector Undertakings (PSUs). 2. The Department of Economic Affairs (DEA) is primarily responsible for managing the government's disinvestment program. 3. The strategic sale of Air India in 2021 is an example of successful disinvestment. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.1 and 3 only
  • C.2 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: B

Statement 1 is CORRECT: Disinvestment indeed aims to reduce the fiscal burden on the government and improve the efficiency of Public Sector Undertakings (PSUs). Statement 2 is INCORRECT: The Department of Investment and Public Asset Management (DIPAM), not the Department of Economic Affairs (DEA), is primarily responsible for managing the government's disinvestment program. Statement 3 is CORRECT: The strategic sale of Air India in 2021 is a notable example of successful disinvestment.

3. Which of the following factors can influence the amount of surplus transferred by the Reserve Bank of India (RBI) to the government? 1. Interest rates 2. Exchange rates 3. The RBI's operational efficiency 4. Government expenditure on social programs Select the correct answer using the code given below:

  • A.1, 2 and 3 only
  • B.2 and 4 only
  • C.1 and 3 only
  • D.1, 2, 3 and 4
Show Answer

Answer: A

Factors that influence the amount of surplus transferred by the RBI to the government include interest rates, exchange rates, and the RBI's operational efficiency. Government expenditure on social programs does not directly influence the RBI's surplus.

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