Finance Minister Arun Jaitley, RBI Governor Shaktikanta Das address a press conference | Praveen Jain/ThePrint
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New Delhi: The Reserve Bank of India board Monday decided to provide an interim dividend of Rs 28,000 crore to the government, bailing the latter out of a sticky financial situation. With revenues falling short of targets, the government is struggling to stick to its revised fiscal deficit target of 3.4 per cent of gross domestic product.

This is the second consecutive interim dividend after the Rs 10,000 crore given to the government in March 2018.

How is the dividend amount determined?

RBI transfers its surplus profits to the central government after making provisions for certain items. These include provisions for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds among others, as per the provisions of the RBI Act 1934.

Also readRBI comes to Modi govt’s rescue, announces interim dividend of Rs 28,000 crore

What is the highest dividend paid so far by RBI?

The highest-ever full dividend was paid by the central bank in August 2015 under the governorship of Raghuram Rajan — Rs 65,896 crore for the RBI’s financial year ending June 2015. This was followed by a dividend of Rs 65,876 crore in August 2016 for the central bank’s financial year ending June 2016.

The high dividend payout followed a report of the Y.H. Malegam committee in 2014 that suggested that the central bank had adequate reserves for three years and could transfer higher amounts to the government.

In fact, the dividend paid for the three-year period between July 2013 and June 2016 — when Rajan headed the RBI — was 71 per cent higher than the dividend paid out in the five years immediately before that.

Due to costs incurred on account of printing of notes following demonetisation, the interim dividend fell to Rs 30,659 crore for the financial year ending June 2017, before increasing to Rs 50,000 crore for the financial year ending June 2018.

What is the dividend amount in govt’s budget calculation for FY March 2019 and March 2020?

The government has estimated that it will receive Rs 68,000 crore from the RBI by March 2019, and Rs 69,000 crore by March 2020.

Why has dividend payout been a bone of contention between govt and RBI?

The government believes the central bank has been conservative in its approach and has retained more capital with itself than required. After failing to resolve the issue, the government and the RBI set up a committee last year, under former RBI governor Bimal Jalan, to decide on the economic capital framework or the capital required by the central bank.

The committee is expected to submit its report by April-May 2019. Once this is determined, it will pave the way for transfer of the RBI’s surplus to the government.

Also read:  In boost to Modi govt, RBI to consider Rs 280 billion early payout to Centre

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