Published: Mon, February 18, 2019
Markets | By Otis Pena

RBI to transfer Rs 28,000 cr interim surplus to government

RBI to transfer Rs 28,000 cr interim surplus to government

The RBI had, for the first time, transferred an interim dividend of Rs 10,000 crore in 2017-18 or FY18 on the latter's request.

The Reserve Bank of India's board, approved 280 billion rupees ($4 billion) as interim dividend, according to a statement.

In January, RBI governor Shaktikanta Das had said the central bank was yet to take a decision on dividend. With the transfer of interim dividend, the Centre will receive Rs 68,000 crore in the form of surplus from the RBI for FY19.

Finance Minister Arun Jaitley is scheduled to address the customary post-Budget meeting of the central board of the Reserve Bank on Monday and highlight the key points of the interim Budget, including the fiscal consolidation roadmap.

Fiscal deficit for 2018-19 is expected to be slightly higher at 3.4 per cent of the GDP on account of Rs 20,000 crore budgeted for income support to farmers.

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In the union budget announced earlier this month, the government revised its fiscal deficit target for 2018-19 upwards to 3.4 per cent from 3.3 per cent budgeted earlier.

The government has, in all, budgeted 741.4 billion rupees in dividends from the RBI and the state-run lenders in the year ending March 31 and has penciled in 829.1 billion rupees for the next year. So far, the practice had been for the central bank to close its books in June and pay out the dividend in August.

Before Rajan's tenure, the payouts from RBI averaged less than Rs 21,600 crore over a five-year period.

However, a recent study by the Centre for Advanced Financial Research and Learning, a Mumbai-based think tank, showed the central bank has insufficient capital, and much less a surplus to hand over to the government.

After failing to arrive at a consensus, the government and the RBI set up a committee under former RBI governor Bimal Jalan to determine the level of reserves that the RBI should hold. It resulted in a public standoff previous year and is seen as one of the reasons for the abrupt exit of then Governor Urjit Patel.

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