Surplus transfer: RBI declares Rs 50,000-crore dividend for 2017-18

By: | Published: August 9, 2018 5:54 AM

The Reserve Bank of India (RBI) on Wednesday announced the transfer of Rs 50,000 crore to the Centre from its 2017-18 (July-June) surplus.

Reserve Bank of India, fiscal deficit, Arvind Subramanian, Raghuram Rajan, RBI capital, finance ministryDividend receipts from the RBI have been one of the major non-tax revenue heads for the Centre.

The Reserve Bank of India (RBI) on Wednesday 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”.

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.

As per the annual accounts of the RBI as on June 30, 2017, contingency and asset development fund aggregated Rs 2.51 lakh crore. Many experts including former chief economic adviser Arvind Subramanian had suggested that the central bank’s ‘excess capital’ could also be redeployed to bolster the capital base of state-owned banks. Former RBI governor Raghuram Rajan had denounced the idea saying if implemented it could get the banking regulator into the business of owning banks with resultant conflicts of interest.

The contingency and asset development fund is only a small fraction of the central bank’s total assets. Some experts view that the perception that the RBI capital is in excess of what generally other central banks have is because of the amounts held in the currency and gold revaluation account (which stood at Rs 5.29 lakh crore on June 30, 2017). The gains arising out of revaluation of foreign currency assets are notional and cannot be treated as free reserves that could be transferred to the government, they reckon.

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