Centre to get RBI’s `99,000cr
Mumbai: The RBI on Friday approved paying `99,122 crore as dividend to the Central government for the accounting period of nine
months ended March 31,
2021. The dividend is likely to alleviate some of the burden off the government’s shoulder at a time when the second wave of the Covid-19 pandemic has hit government finances. The Centre is staring at a high fiscaldeficit target of
6.8 per cent in 2021-22.
The Reserve Bank of India (RBI) on Friday approved paying Rs 99,122 crore as dividend to the central government for the accounting period of nine months ended March
31, 2021. The dividend is likely to alleviate some burden off the government’s shoulder at a time when the second wave of the Covid-19 pandemic has hit government finances. The government is staring at an extra-ordinary fiscal deficit target of 6.8 percent in 2021-22 (AprilMarch), higher than the usual 3.5 percent.
The central bank is mandated by the RBI Act 1934 to transfer surplus funds or balance profits to the government. The RBI earns its profits primarily from the interest it gets from the purchase and sale of government securities, the interest earned from lending to banks and an interest earned on bond holdings earned on open market principles.
The dividend is substantially higher than the budgeted surplus transfer of Rs 53,500 crore by the RBI and the nationalised banks for FY22 and Rs
57,130 crore by the RBI for
FY21. The central bank recently switched to an April-March fiscal year from July-to-June previously, and the payment this time around is for a nine-month period. Since fiscal accounting is cashbased, the dividend transfer will be accounted in
FY22 for the Centre.
“While we await the detailed document to gauge the sources of higher RBI income and thus transfers, it needs to be seen if they used the
revaluation reserves in order to pay higher dividend. Nonetheless, this is definitely a relief for the government on revenue front whose finances would soon come under pressure amid: (1) Fears of delayed execution of ambitious divestment target of Rs 1.75 lakh crore, (2) Higher possible doles payouts than budgeted on food, fertiliser subsidy and NREGA, and (3) Also possible fading of the positive upside surprises of fiscal tax buffers on account of modestly budgeted indirect taxes,” said Madhavi Arora, lead economist at Emkay Global.
“Given the strengthened domestic assets and record foreign reserves that RBI holds, we feel that there might be another round of special dividend in case of additional requirement in future due to the uncertain environment,” said Mohit Nigam, head of portfolio management services at Hem Securities, a domestic stock brokerage house.
The decision to transfer the surplus to the central government was taken at the meeting of the Central Board of Directors of RBI. The meeting was held through video conferencing. The RBI Board, according to the press release, also reviewed the current economic situation, global and domestic challenges and recent policy measures taken by the Reserve Bank to mitigate the adverse impact of the second wave of COVID-19 on the economy.
During the meeting, the board, headed by governor Shaktikanta Das, also "approved the Annual Report and accounts of the Reserve Bank for the transition period.