You are here: Home » Finance » News » Banks
Business Standard

Govt seeks special dividend from RBI for bank recapitalisation

To be used to fund a part of Rs 2.11-lakh crore plan to recapitalise banks

Arup Roychoudhury  |  New Delhi 

Bank recapitalisation plan, Banks, Indian Banks

The government has sought a special from the (RBI) to fund a part of its Rs 2.11-lakh crore plan to recapitalise public sector

“The has been asked if it can pay a special dividend, apart from the yearly surplus that it pays the Centre. This dividend, if agreed to by the central bank, will be used only for bank recapitalisation,” said an official aware of the deliberations.

Provided talks on the matter are fruitful, the payout will made during the current financial year ending June 30, 2018. 

“It remains to be seen whether the central bank will have room for a special dividend,” the official said.

The had for its financial year 2016-17 transferred Rs 30,659 crore of its surplus to the government, less than half of the Rs 65,876 crore it had handed over a year earlier. The government had in the Budget for 2017-18 accounted for a of Rs 74,901 crore from the and nationalised  

Economic Affairs Secretary had said in August that the RBI’s share was expected to be Rs 58,000 crore. According to him, the had Rs 14,000 crore more in surplus from the previous financial year for provisioning. He had said the Centre would ask the to pay some of that amount as well. 

The official quoted above said the matter, which was separate from the Centre’s request for a special dividend, was still being pursued.

News reports have suggested that the will participate in the Rs 1.35-lakh crore bond programme that is a component of the plan. Another official said the proposal was not being pursued.

The government may issue the first tranche of the bonds around the first week of December. This tranche could comprise bonds with 10-year tenure and an interest rate of 7 per cent.

The quantum of the first tranche has not yet been decided. Senior ministry officials have said these bonds will be front-loaded over the next three or four quarters.

In October, the government announced the capital infusion plan for state-owned Out of the total commitment, Rs 1.35-lakh crore will come from the sale of bonds and the balance Rs 76,000 crore will be through budgetary allocation and fundraising from the markets. The package marks a sharp increase over the current budgetary allocation. Under the Indradhanush plan, the government has allocated Rs 20,000 crore towards over the current and next fiscal years.

SOURCE OF FUNDS
  • As talks with and the advance, Centre seeks special dividend
  • has not yet agreed to proposal; no clarity on if it has space in its FY18 books
  • Proceeds from any such to be used for bank recapitalisation
  • Govt still pursuing for additional surplus from FY17
  • No proposal for to buy bonds from govt, sources say


First Published: Wed, November 15 2017. 05:01 IST
RECOMMENDED FOR YOU