The transfer could take place before the RBI’s Economic Capital Framework panel submits its recommendation
The Reserve Bank of India (RBI) may transfer an interim dividend of over Rs 30,000 crore to the Centre this year, a source told FE. This will help a poll-bound government meet its FY19 fiscal deficit target of 3.3% of GDP at a time when goods and services tax and disinvestment revenues are expected to trail the budgeted goals. The RBI in August 2018 announced the transfer of Rs 50,000 crore to the Centre from its 2017-18 (July-June) surplus. Given that the amount included Rs 10,000 crore transferred in March as an interim measure to aid the Centre’s effort to contain the FY18 fiscal deficit, the Centre will have only Rs 40,000 crore available for FY19, against the finance ministry’s estimate of Rs 45,000 crore. The Centre’s FY19 receipts budget includes Rs 54,817 crore as “dividend/surplus from RBI, public sector banks and financial institutions”.
The transfer could take place before the Bimal Jalan-led expert committee on the RBI’s Economic Capital Framework (ECF) submits its recommendation, said the source. In a briefing on Monday, RBI governor Shaktikanta Das, however, didn’t reveal if the central bank would transfer an interim dividend, saying any such decision would be announced in due course.
Earlier this fiscal, the finance ministry’s demand for changes to the RBI’s ECF, which determines its surplus transfer to the Centre, to ensure a greater flow of dividend ahead of 2019 elections had strained its relations with the RBI management and was believed to be one of the main reasons for the resignation of Urjit Patel as the governor. Prime Minister Narendra Modi, however, said recently that Patel wanted to quit months before his departure in December for personal reasons.
Economic affairs secretary Subhash Chandra Garg last month said the government would seek an interim dividend from the central bank. The finance ministry has asserted that the Centre will meet its fiscal deficit target of 3.3% of GDP for FY19, despite a shortfall in GST collection and an expected boost to spending ahead of 2019 polls. The shortfall in GST revenue from the budgetted target is expected to be as much as Rs 1 lakh crore this fiscal. Even the net direct tax collection has lagged the budgetted targets —13.6% rise between April and December against a budgetted increase of 14.4% for the full year. An interim dividend from the RBI will come in handy for the Centre in such a situation.
Dividend receipts from the RBI have been one of the major non-tax revenue heads for the Centre. Last year, the central bank nearly halved the dividend to Rs 30,659 crore from the Rs 58,000 crore budgeted by the Centre as the post-demonetisation currency printing cost (about Rs 20,000 crore) depleted its surplus. The RBI had transferred Rs 65,876 crore in 2016.