Public sector banks are required to pay a minimum dividend of 20 per cent of their paid-up capital, or 20 per cent of their post-tax profits, whichever is higher

Higher-than-expected dividend and surplus payouts from the Reserve Bank of India and state-run financial institutions have provided the much-needed fiscal leeway to the Centre. Total collections under this head have outpaced the full-year Budget Estimate of ₹3.19 lakh crore, possibly blunting the impact of an anticipated moderation in direct tax buoyancy.

Budget Estimates (BE) for ‘dividend/surplus of the Reserve Bank of India, nationalised banks and financial institutions have been pegged at ₹3.16 lakh crore, which is nearly 47 per cent of non-tax revenue of over ₹6.66 lakh crore. As of July 30, total collections under the said head crossed over ₹3.24 lakh crore after Life Insurance Corporation of India (LIC) gave a dividend of over ₹12,000 crore for FY26.

Collections under this head got off to a strong start, anchored by a record surplus transfer of ₹2.87 lakh crore from the RBI. This was followed by good payout from banks and insurance companies. While LIC topped the dividend payouts among public financial institutions, State Bank of India led the tally among the 10 public sector banks that have remitted dividends to the Centre so far.

As per policy, public sector banks are required to pay a minimum dividend of 20 per cent of their paid-up capital, or 20 per cent of their post-tax profits, whichever is higher. For public sector insurance companies, there is no specific limit. For example, dividend distribution policy of Life Insurance Corporation of India says: “Section 28B of the LIC Act, 1956, provides that no dividend shall be declared or paid by the Corporation for any financial year except out of the surpluses and profits.”

Meanwhile, disinvestment has also given some comfort to the government, as total mop-up through minority stake sale and remittance from SUUTI (Specified Undertaking of Unit Trust of India) has risen to over ₹21,000 crore and already crossed collection during each of FY24, FY25 and FY 26.  This receipt is part of the head ‘miscellaneous capital receipts.’ The BE under this head is ₹80,000 crore and this comprises asset monetisation, too.

All these collections are expected to help the government check fiscal deficit as subsidy and some other revenue expenditure is set to exceed BE, while tax collection could face stress on account of West Asia war and below normal monsoon.

Published on July 30, 2026