The central Board of Reserve Bank of India (RBI) has decided to pay Rs 28,000 crore as an interim dividend to the Centre. This is the second successive year when an interim dividend has been paid to the government.
"Today's interim surplus was decided after the application of the economic capital framework," RBI said in a release on Monday. Reserve bank follows July to June financial year.
The RBI Board said that it arrived at the final interim dividend number based on the central bank's audited earning of first six months. The first half was over in December 2018.
"The Board reviewed the current economic situation, global and domestic challenges and other specific areas of operations of the Reserve Bank. Based on a limited audit review and after applying the extant economic capital framework, the Board decided to transfer an interim surplus of Rs 28,000 crore to the central government for the half year ended December 31, 2018. This is the second successive year that RBI will be transferring an interim surplus.
Even in 2017-18, RBI handed out an interim dividend of Rs 10,000 crore in March to help the government consolidate its fiscal position. Later in August 2018, after RBI closed its annual accounts for 2017-18, it transferred another Rs 40,000 crore, taking the total dividend payout to Rs 50,000 crore, which was about 63% higher than the previous year. In 2016-17, it had paid Rs 30,659 crore, lower than previous years, as the cost of printing new notes after demonetisation ate into the central bank's income.
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.
The central bank has also appointed an expert committee headed by former RBI governor Bimal Jalan to identify the excess capital by April 2019, after the bank's central Board proposed the panel's formation following a dispute between the then-governor Urjit Patel and the government, following which he stepped down on December 11, 2018.
The six-member panel has former deputy RBI governor Rakesh Mohan as its vice chairman. The issue of reserves had generated tension, with former governor Patel strongly opposing to any transfer of surplus funds. The government felt that RBI's reserves exceeded its requirements and these could be used for productive purposes such as recapitalising public sector banks.
At the end of June 2018, the last financial year of RBI, its total reserves stood at Rs 9.59 lakh crore, at about a fourth of its Rs 36.18 lakh crore balance-sheet. Of this, currency and gold revaluation reserves stood at Rs 6.91 lakh crore, Rs 2.32 lakh crore was in the contingency fund, Rs 22,811 crore in the asset development fund and Rs 13,285 crore in the investment revaluation account.
