Home / News / India /  RBI board approves dividend transfer of 57,128 crore to the government

Mumbai: The central board of Reserve Bank of India has decided to transfer 57,128 crore as surplus to the government for the fiscal year 2020. In a notification released on Friday, the board also decided to keep the contingency risk buffer at 5.5%.

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

Last year RBI had transferred a whopping 1.76 trillion to the central exchequer for the year ended June 2019, including 5.26 trillion of excess contingent reserves and interim dividend of 28,000 crore paid in February 2019. This followed the recommendation by the panel headed by former RBI governor Bimal Jalan which was set up by RBI in 2018 to recommend 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."

RBI and the government follow different financial years. The apex bank is in the process of changing its financial year to the same as the government's from 1 April 2021. The board also approved the Annual Report and accounts of RBI for the year 2019-20, said the central bank in its notification

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

The dividend from the central bank will come at a time when the central government's finances are under severe strain. The government's fiscal deficit as on 30 June touched 83.2% of the full year budget target of 7.96 trillion, primarily on account of a sharp fall in revenues due to the nationwide lockdown imposed to curb covid-19.

The government has sharply raised its gross borrowing programme for this fiscal from the budgeted 7.8 trillion to 12 trillion, signalling a major slippage in fiscal deficit necessitated on account of the covid-19 pandemic.

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