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A worker walks past the logo of Reserve Bank of India (RBI) inside its office in New Delhi. (REUTERS)
A worker walks past the logo of Reserve Bank of India (RBI) inside its office in New Delhi. (REUTERS)

RBI board to meet on 14 August over dividend

  • The dividend from RBI will come at a time when the Centre’s finances are under severe strain
  • The government has budgeted 60,000 crore as dividends from RBI and state-run banks and financial institutions, according to the Union Budget 2020-21

The central board of Reserve Bank of India (RBI) will meet on 14 August to discuss the dividend transfer to the government, according to a person aware of the matter.

The government has budgeted 60,000 crore as dividends from RBI and state-run banks and financial institutions, according to the Union Budget 2020-21.

RBI had transferred a 1.76 trillion to the central exchequer for the year to June 2019, including 52,637 crore of excess contingent reserves. The panel headed by former RBI governor Bimal Jalan set up in 2018 had recommended a formula for the sharing of its profits with the government. The panel had approved a record dividend and has said an interim dividend could be paid only “under exceptional circumstances."

An email sent to RBI didn’t elicit any response

RBI and the government follow different fiscal years. RBI is in the process of changing its fiscal to the same as that of the government from 1 April 2021.

RBI did not pay any interim dividend to the government for the year to June 2020 as the Jalan panel had recommended that interim dividend should be paid to the government only in “exceptional circumstances".

The dividend from RBI will come at a time when the Centre’s finances are under severe strain. The government’s fiscal deficit as on 30 June touched 83.2% of the full-year target of 7.96 trillion, primarily on a sharp fall in revenues due to the nationwide lockdown.

“The liquidity situation, given that there has been a preponderance of excess liquidity in the banking system, which is parked with RBI, may have a connotation in the form of a lower dividend to government," said Soumyakanti Ghosh, chief economist, State Bank of India. “Dividend transfer also needs to be juxtaposed against the possibility of monetization of government deficit in the current fiscal," he added.

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