Govt is expecting additional money from RBI as dividend: Subhash C Garg

The government is expecting additional money from the Reserve Bank of India (RBI) as dividend this month, Subhash C Garg, secretary, Department of Economic Affairs, said on Thursday.

In August, the RBI had paid the government a dividend of Rs 306.59 billion for the year ended June 2017. The amount was less than half of Rs 658.76 billion it had paid in 2015-16. The RBI’s financial year runs from July to June.

The government is looking for additional funds from various sources, including dividends from state-owned entities and a transfer of surplus from the central bank, to bridge the fiscal deficit gap in 2017-18. The fiscal deficit is expected to widen to 3.5 per cent of the gross domestic product (GDP) in the current financial year, as against the budget estimate of 3.2 per cent.

Garg, speaking to reporters on the sidelines of an event in Mumbai, said the RBI had already transferred about Rs 300 billion for 2016-17. “Some more is expected to happen (extra dividend) this month itself,” he added.

He, however, declined to disclose any details of the dividend, including the year for which the RBI would be giving the amount. “I would not be getting into the specific colour and kind of dividend,” Garg said.

Abundant liquidity with banks after demonetisation, resultant reverse repo measures by the RBI, and the cost of printing new currency notes had led to a fall in the central bank’s transfer of surplus to the Union government for the year ended June 2017. The strengthening of the rupee against the dollar also pulled down the value assets owned by the RBI overseas.

According to sources, the government may get additional dividend of Rs 100 billion from the RBI this month. Under the RBI Act, 1934, the central bank is required to pay the government its surplus after making provisions for bad and doubtful debts, depreciation in assets and, contribution to staff and superannuation fund, among others.