The Reserve Bank of India (RBI) has announced that it will transfer an amount of Rs 28000 crore as interim dividend to the government. The announcement was made after the RBI board met on Monday. This was the first board meet after the Interim Budget 2019 was announced on 1 February.
The decision on interim dividend comes at a time when the government has been looking at resources to roll out populist schemes with Lok Sabha elections round the corner.
This is the second successive year that the RBI will be transferring an interim surplus. In the past, the RBI has transferred its surplus profit or dividend to the government in August every year, including in the election years of 2009 and 2014, after considering audited accounts for the year.
An RBI year begins in July and ends in June.
Last year, it paid an interim dividend of Rs 10000 crore in March and another Rs 40,000 crore in August.
In a statement, the bank said its board approved Rs 28000 crore payment to the government as an interim dividend after a “limited audit review” and “after applying the extant economic capital framework”.
The post-Budget meeting of the RBI Central Board was addressed by Union Finance Minister Arun Jaitley who outlined the various reforms and policy measures taken by the government over the last four years.
The meeting was also attended by Minister of State for Finance Pratap Shukla, Finance Secretary and Secretary (Expenditure) Ajay Narayan Jha, Secretary (Revenue) Ajay Bhushan Pandey and Chief Economic Adviser Krishnamurthy Subramanian.
After the interaction with the FM, the board reviewed the current economic situation, global and domestic challenges and other specific areas of operations of the RBI.
“Based on a limited audit review and after applying the extant economic capital framework, the Board decided to transfer an interim surplus of ₹ 280 billion to the central government for the half-year ended December 31, 2018. This is the second successive year that the Reserve Bank will be transferring an interim surplus,” the statement said.
The meeting was chaired by RBI Governor Shaktikanta Das.
In August 2017, the RBI had paid Rs 30,659-crore dividend, down from Rs 65,876 crore the previous year. In the election year, the government wanted about Rs 27,000 crore in dividend that had been withheld in the last two financial years. As per the Ministry of Finance estimates, RBI has at least Rs 3.6 trillion surplus capital, which it says can be used to help bolster weak Indian banks.
The payment will help the NDA government meet the welfare expenditures and the fiscal deficit breach.
Under previous Governor Urjit Patel, payment of interim dividend was one of the contentious issues between the government and the RBI. Patel resigned in December 2018, and was replaced by retired bureaucrat Shaktikanta Das.
The RBI transfers its surplus amount to the government under Section 47 of the RBI Act, 1934 that says: “After making provision for bad and doubtful debts, depreciation in assets, contribution to staff and superannuation fund and for all matters for which provision is to be made by or under the Act or which are usually provided by bankers, the balance of the profits shall be paid to the central government.”
The RBI is following a similar measure undertaken by Turkey’s central bank that helped the government before municipal elections in March.
The RBI statement said the meeting also observed two minutes silence as a mark of respect for the security personnel killed in the Pulwama terror attack on 14 February.