Ahead Of General Elections, RBI Gives Rs 28,000 Cr Interim Dividend To Govt

The Reserve Bank Of India (RBI) on Monday, February 18 announced that it will give Rs 28,000 crore interim dividend to the present government. This dividend transfer is most likely going to help the government meet its revised fiscal deficit of 3.4% of the GDP for 2018-2019.

Why did the RBI transfer surplus?

According to The Times Of India, the central bank in a statement said, “Based on a limited audit review and after applying the extant economic capital framework, the board decided to transfer an interim surplus of Rs 28,000 crore to the central government for the half-year ended December 31, 2018.”

This is the second consecutive year where the central bank had announced an advanced payment to the Modi government. Reportedly, the RBI, which follows a June-July financial year has already transferred Rs 40,000 crore in the current fiscal as compared to Rs 50,000 crore including Rs 10,000 crore as interim dividend last year. With this payment, the total dividend payout by the RBI in the present fiscal stands at Rs 68,000.

Media reports suggest that with this new move, the RBI is most likely emulating Turkey’s central bank which came to the rescue of the government before the municipal elections in March. The RBI’s unprecedented dividend will help the Modi government to help bridge any budget gap and even prove to be crucial in funding an financial support programme for farmers.

According to The Economic Times, the government has budgeted Rs 741.4 billion in dividends from the RBI and other state-run banks by the year-ending on March 31 and Rs 829.1 billion for the next year. The central government needs a total of Rs 200 billion for the first instalment of the $10.5 billion farmer support programme by March 31.

The demand for more dividends from the RBI and to part with more percentage of its capital has been a contentious topic between the central bank and the government, which not only resulted in a public standoff in 2018 but also led to the exit of former RBI Governor Urjit Patel. Reportedly, the finance ministry has asked the central bank to transfer Rs. 27,000 crore of surplus capital during the last two financial years. Additionally, the finance ministry has estimated that RBI has at least Rs 3.6 lakh crore of surplus capital which it can use to help ailing banks, reported NDTV.

Also Read: Centre’s Face Of Demonetisation, Shaktikanta Das, Appointed As RBI’s New Governor