RBI to pay Rs. 50,000 crore dividend to Government for FY18

The Reserve Bank of India (RBI) has transferred surplus (dividend) of Rs. 50,000 crore to Government for the year ended in June 2018, over 63% more than Rs 30,659 crore which is transferred in 2017. RBI surplus forms the sizeable chunk of revenue which government earns under the head of ‘non-tax’, which is mainly dividends distributed by state-owned firms.

With the increase in RBI surplus by close to Rs 20,000 crore, Centre’s prospect of meeting fiscal deficit target (pegged at 3.3% of gross domestic product this financial year) has improved based on fiscal consolidation and budget assumptions. The transfer also gives the Central Government more elbow room to infuse capital into public sector banks owned by it.

Technically, transfer of profits of RBI is provided in Section 47 of the RBI Act, 1934. It states that after making provisions for bad and doubtful debts, contribution to staff and superannuation fund, depreciation in assets and for all matters for which provisions are made by or under Act or that are usually provided by bankers, the balance of profits is to be paid to Central Government. The RBI’s profits essentially represent a difference of income over expenditure.

Earlier in 2017, RBI had slashed surplus in the wake of demonetisation as its expenditure shot up largely because of a sharp rise in provisions and cost of printing currency notes. For the year 2015-16, RBI board had approved the transfer of surplus amounting to Rs 65,876 crore to the government. In 2014-15, it had paid Rs 65,896 crore to Government, which came as the boon to Government in covering fiscal deficit target. The surplus transferred to the government was Rs 52,679 crore in 2013-14.

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