RBI board okays Rs 28000 cr as interim dividend to govt

RBI board okays Rs 28000 cr as interim dividend to govt
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New Delhi, Feb 19: The central board of the Reserve Bank of India (RBI) on Monday approved the transfer of Rs 28,000 crore as interim dividend to the government, a much-needed transfer against the backdrop of a tight fiscal situation.
“The board reviewed the current economic situation, global and domestic challenges and other specific areas of operations of the Reserve Bank. 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,” a statement from the central bank said.
“This is the second successive year that the Reserve Bank will be transferring an interim surplus,” it added after the board meeting chaired by RBI governor Shaktikanta Das. RBI’s financial year ends in July and the interim dividend will be with the government by March.
Sources had earlier said while the government was seeking up to Rs 40,000 crore as interim dividend but the audit committee of the central bank opted for Rs 28,000 crore after taking into account policies and requirements of the RBI. Last year, the RBI paid an interim dividend of Rs 10,000 crore and for the full financial year it amounted to Rs 50,000 crore.
The central board, which met in national capital for its customary post budget meeting, observed two minutes silence in memory of the security force personnel who laid down their lives in Pulwama.
Surplus transfer had been the flashpoint between the finance ministry and former RBI governor Urjit Patel as the government insisted on a higher payout, which was being seen as a measure to help improve public finances and also provide enough funds to finance some of the big ticket announcements for the social sector ahead of the 2019 general elections.
The department of economic affairs had earlier forcefully argued that the central bank was sitting on “excess reserves” which could be transferred to the government but the RBI strongly resisted the move. In the past too, the government and the central bank have sparred over dividend payout, which increased significantly during Raghuram Rajan’s term as governor of the central bank.
Sources had pointed out earlier that the issue of dividend payment is separate from the economic capital framework. A panel headed by former RBI governor Bimal Jalan is examining the issue of appropriate economic capital framework.
The government has budgeted Rs 74,140 crore from dividend/surplus of RBI, nationalised banks and financial institutions for 2018-19 and next year it expects it to go up to Rs 82,912 crore.
“This meeting is an interaction on the interim budget and overall economy, these are specifics which are not decided in my presence. The RBI independently decides that,” finance minister Arun Jaitley said at the news conference when asked about the interim dividend.
The FM in his address outlined the various reforms and policy measures taken by the government over the last four years and their overall impact.