In order to provide the necessary push to public sector banks for recapitalisation and maintain the fiscal deficit level, the government is likely to receive around Rs 10,000 crore from the Reserve Bank of India as interim dividend by the end of this month.

Earlier, the RBI declined requests from the government for any additional dividend payout. The dividend transferred by RBI to the government halved to Rs 30,659 crore, which led economists to question whether the government should brace itself for a shortfall in revenue from this source.

The government had sought additional funds following a plan to boost spending and shore up support ahead of the 2019 elections. Over the past few years, RBI has been transferring the entire surplus generated through its investment activities to the government.

For 2018-19, proceeds from dividends from the RBI, nationalised banks and financial institutions have been pegged at Rs 54,817 crore, only 6 per cent higher than in the previous year.

The Centre received Rs 51,623 crore in 2017-18, far lower than the budgeted Rs 74,901 crore, mainly due to shortfall of nearly Rs 35,000 crore in dividend from the RBI.

“We always share the dividend with the government and we have already done
that this year. That is something which is done in a mechanical way and we will continue doing so, going forward,” RBI Governor Urjit Patel said.

With dividends from other PSBs very hard to come by, many pointed out that the government may again dip into the coffers of other public sector enterprises and force them to pay higher dividends to the government.

However, high level of stressed assets and weak credit growth will mean that
public sector banks will not be in a position to pay hefty dividends to the government. Most banks have seen profits shrink because of high provisions against bad loans.

According to government data, loans worth Rs 81,683 crore were written-off by public sector banks in FY 2016-17.