Mumbai: Giving in to the Centre’s demand, the Reserve Bank of India (RBI) board on Monday has approved an interim dividend of Rs 28,000 crore to the government. This is the second successive year the RBI would be transferring an advance payment to the current government. With this, RBI’s total dividend payout to the government for FY19 stands at Rs 68,000 crore.
Coming ahead of the general elections, the payout would help the cash-strapped government bridge the fiscal deficit and provide funds for its mega income support programme to woo farmers. The government had been counting on the RBI, as the revenue from the GST has, for most part of the year, lagged the Rs 1 lakh crore monthly target. Moreover, the proceeds from disinvestment are now at just Rs 53,558 crore against the full-year budget target of Rs 80,000 crore.
During his interim budget speech this month, Piyush Goyal revised the fiscal deficit target to 3.4 per cent of GDP from the earlier set target of 3.3 per cent. The slippage in fiscal deficit was due to several sops announced by the government with an eye on the 2019 Lok Sabha polls---the key among them being the 'Pradhan Mantri Kisan Samman Nidhi', which involved an annual payment of Rs 6,000 to farmers holding cultivable land of up to two hectares.
The RBI follows a July-June financial year, so, the first half was over in December. The RBI has already transferred Rs 40,000 crore in the current year (2018-19) and with the interim dividend (H1FY19 at Rs 28,000 crore), the total dividend paid for FY19 would come to Rs 68,000 crore. The central bank had paid Rs 50,000 crore, including Rs 10,000 crore interim dividend, last year.
The government has estimated Rs 82,911 crore accrual from dividend from banks, financial institutions and the RBI in 2019-20, according to the interim budget document. Even in the ongoing fiscal, it estimates accrual of Rs 74,140 crore, much higher than the budget estimate of Rs 54,817 crore.
“Based on a limited audit review and after applying the extant economic capital framework, the (RBI) board decided to transfer an interim surplus of Rs 280 billion to the central government for the half-year ended December 31, 2018. This is the second successive year that the Reserve Bank will be transferring an interim surplus,” said the RBI in a statement.
The central bank is mandated by the RBI Act to transfer surplus funds or balance profits to the government.
The demand on the RBI for more dividends and to part with a greater share of its capital has been a contentious issue between the central bank and the government and is seen as one of the reasons for the abrupt exit of then governor Urjit Patel.
The RBI would be meeting the heads of banks on February 21 to discuss transmitting the interest rate cut to the borrowers. Earlier this month, the Reserve Bank cut the benchmark interest rate by 0.25 per cent to 6.25 per cent.
In a release, RBI also said it would inject Rs 12,500 crore into the system through purchase of government securities on Thursday to increase liquidity.
The purchase will be made through open market operations (OMOs). "Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the RBI has decided to conduct purchase of...government securities under OMOs for an aggregate amount of Rs 125 billion on February 21, 2019," the RBI release said.
