On Thursday, the Reserve Bank of India (RBI) paid around Rs 66,000 crore as dividend to government. This is the highest ever dividend paid by RBI to government in 80 years. Also, this amount is 22 percent more than the dividend paid last year. The paid by RBI to government has increased by four times over the years.
The highest dividend payment made to the government will help in the following as stated by bond dealers, economists, etc.
- Reduce the government’s finances
- Provide liquidity to the overall system to retain low rate of interests
- Meet the fiscal deficit targets
- Make available funds for capital expenditure of the government
Going by their statement, this move by the central government is another proof showing its active support to the initiatives taken by the government to speed up the slowing economy.
The RBI has many sources of income. Of these, the major ones are the coupon payments that it receives on its government securities’ holdings, the interest it gets from the banks that borrow money and the interest incomes on sovereign bonds’ holdings, etc. Each year, RBI meets its expenses and sets aside a part of its overall profits. This amount is transferred to the government exchequer.
The current year’s dividend paid by RBI is over Rs 64,500 crore. It has been budgeted under Dividend or Surplus of RBI, financial institutions and nationalized banks by the finance minister. As per the economists, the nationalized banks pay the dividend to the central government, and so the central exchequer’s receipts are sure to exceed the estimates of Budget by a considerable amount. On the other hand, the bond dealers see this huge dividend from the central bank as an evidence of how the bank is helping the government to revive the slowing economy. It is also of help to the government in facing the friction that is said to exist between the central bank and the government.
