Centre may ask RBI for special interim dividend

ONE OF the major reason behind sharp drop in surplus of RBI was due to transfer of significant amount of money to reserves. Now, the government is trying to get part of this provision from RBI.

The Centre may ask the Reserve Bank of India to reverse the provisions the central bank has made and use the amount to pay a higher dividend to the government in the current financial year ending March 2018, a finance ministry official said.

The RBI had transferred 306.59 bln rupees as surplus to the government in August, which was less than half the sum transferred in the previous year. "One of the factors that led to the drop in surplus is that they have transferred a significant chunk to reserves. We are seeing if some of that can be transferred to the government this fiscal," the official said. "If you treat RBI as a company, it would be similar to paying interim dividend," the official added. The RBI and the government follow different financial years: Jul-Jun for RBI and Apr-Mar for the government.

Last week, Economic Affairs Secretary Subhash Garg had said the finance ministry was in discussions with the central bank to explore the possibility of transferring an additional dividend. Cogencis had reported in August that the government had asked the central bank to review its surplus distribution policy. The RBI's surplus fell primarily because of a sharp decline in interest income and a rise in expenditure on printing of currency notes following the demonetisation of high-value currency notes in November. In 2016-17, RBI made provisions of 131.90 bln rupees.