The RBI on Monday announced an interim dividend of ₹28,000 crore for the Centre. The dividend amount has always been a contentious issue between the central bank and the government, with the later demanding that the RBI part with a greater share of its capital.

In fact, the issue had resulted in a public stand-off last year between the RBI and the government, and was cited as one of the reasons for the abrupt exit of then Governor Urjit Patel. The Finance Ministry had asked the central bank to transfer about ₹27, 000 crore of surplus capital withheld by it in the previous two financial years.

“Based on a limited audit review, and after applying the extant economic capital framework, the board (of RBI) decided to transfer an interim surplus of ₹280 billion (₹28,000 crore) to the Central government for the half-year ended December 31, 2018,” said an RBI statement issued after its meeting here.

The meeting was addressed by Finance Minister Arun Jaitley. The decision on the interim dividend was taken subsequently.

Also read: What you need to know about the RBI vs Centre standoff

The interim dividend factored in the revised estimate of the fiscal deficit for the current fiscal, which is now 3.4 per cent against the Budgetary estimate of 3.3 per cent. Since the Centre’s revenue from GST has been below expectations, it is hoping to cap the deficit with non-tax revenue such as disinvestments and surplus from the RBI.

While the government has an April-March accounting year, the RBI’s is a July-June one. The latter usually declares transferring dividend in August. Since the government needs more capital now, the interim dividend has been declared already. This is the second successive year of transfer of interim dividend. Last year, the amount was ₹10,000 crore.

Surplus profits

The RBI transfers its surplus profits to the government under provisions of Section 47 of the Reserve Bank of India Act, 1934.

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Initially, the government had budgeted ₹54,817.25 crore as ‘Dividend/Surplus of Reserve Bank of India, Nationalised Banks & Financial Institutions’, which has now been revised to ₹74,140.37 crore. For FY20, the budgeted amount is ₹82,911.56 crore.

 

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