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  1. Will RBI provide Rs 10,000 crore interim dividend to government?

Will RBI provide Rs 10,000 crore interim dividend to government?

While India’s central bank had earlier reportedly declined government’s requests for an interim dividend, RBI is likely to declare an interim dividend of Rs 10,000 crore.

By: | Published: March 7, 2018 10:03 AM
RBI, Axis Bank, Indian Overseas Bank , RBi slaps Axis bank, Know Your Customer norms, IRAC norms, news on axis bank, news on IOB bank Earlier, the government was reportedly looking to ask the RBI to transfer an additional Rs 13,000 crore, primarily to create a corpus for the mega PSU bank recapitalisation exercise. (Image: PTI)

While India’s central bank had earlier reportedly declined government’s requests for an interim dividend, RBI is likely to declare an interim dividend of Rs 10,000 crore, Bloomberg reported citing sources. Interestingly, the Reserve Bank had reportedly declined requests from the government for an additional payment and the dividend payout had dropped to a 5-year low. Earlier, the government was reportedly looking to ask the RBI to transfer an additional Rs 13,000 crore, primarily to create a corpus for the mega PSU bank recapitalisation exercise.

According to the Bloomberg report, the amount has been calculated for the six months ending 31st December, as Reserve Bank of India’s financial year runs from July to June, the agency reported people aware of the development as saying.

Interestingly, the government had budgeted Rs 58,000 crore dividend from RBI for FY18, however, the RBI paid out only Rs 30,659 crore, much lower lower than Rs 65,876 crore it had transferred in the previous year, on account of the additional costs incurred on printing and managing excess liquidity after demonetisation. As per data, RBI’s profit was around Rs 44,000 crore, of which Rs 30,000 crore has been distributed and Rs 13,000 crore it retained towards risks and reserves.

According to the RBI Act, the central bank must transfer the balance of its profits, after making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds. As Prime Minister Narendra Modi-led administration is would look to boost expenditure, non-receipt of the RBI dividend may further widen the government’s fiscal deficit target.

Before every Union Budget announcement, the government and the central bank RBI deliberate on the amount to be transferred to the government as dividend. As per the current process, the government puts forward its dividend expectation number and the RBI, after calculating its provision requirements and funds needed to be kept aside for contingencies, comes up with its figure. Finally, after discussions, the RBI provides an indicative figure, which the government puts under the ‘non-tax revenue’ head in the receipts budget.

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