RBI likely to pay Rs 57,000 crore in dividends to government in 2016-17

NEW DELHI: The Reserve Bank of India is likely to pay the government Rs 57,000 crore in dividends in 2016-17, slightly less than the amount it paid in the current fiscal but much higher than that in earlier years.

The government has budgeted Rs 69,897 crore through dividends from state-owned banks, financial entities and RBI, lower than the Rs 73,905 crore it is expected to receive this fiscal. The budget documents do not provide a break-up of the amount expected from banks and RBI. "We are expecting Rs 55,000-60,000 crore from RBI in next financial year," a senior government official told ET.

This implies that the government is not relying much on dividends from public sector banks that may need to retain earnings to bolster their balance sheet. Finance Minister Arun Jaitley has allocated Rs 25,000 crore to bank capitalisation in Budget Estimates for 2016-17. In the current fiscal, RBI has transferred Rs 65,896 crore to the government, almost its entire income after meeting expenditure, in a departure from its earlier practice.A similar trend in expected in 2017-18, with substantial RBI funds providing support to fiscally stretched government.




Earlier, RBI used to pay only a part of its income "defined as gross income less expenditure" to the government while the rest would go to its contingency fund and asset development fund.

Since 2013-14, RBI has not been making allocations to these funds and has been instead distributing almost entire surplus to the government after meeting its spending. The surplus is usually transferred to the government in August after the RBI finalises its accounts, providing a timely boost to the government at a time when the revenue flow is less.

Under Section 47 of the RBI Act, 1934 the central bank is mandated to pay balance profits to the government.