RBI’s dividend to Government falls by almost half

The Reserve Bank of India (RBI) on Thursday announced that it will transfer Rs 30,659 crore as surplus to the government for the year ended June 2017, less than half the amount transferred last year.

While the move could upset the Finance Ministry’s Budget arithmetic, a lower surplus also dents the broad premise that scrapping of currency notes that failed to return to the banking system post demonetisation would extinguish the RBI’s liabilities to an equivalent measure and, thus, open the possibility of transfer of these gains to the Centre in the form of higher dividends.

The RBI’s profits essentially represents the difference of income over expenditure. The key source of income for the Central bank is interest arising from its foreign assets and domestic assets.

For the year 2015-16, the RBI board had approved the transfer of surplus amounting to Rs 65,876 crore to the government. In the previous year, the Central bank had paid Rs 65,896 crore to the government, which came as a boon to the government in covering the deficit. The surplus transferred to the government was Rs 52,679 crore in 2013-14. The RBI did not give reasons of the sharp fall in the surplus income for the year ended June 2017.

The RBI’s main source of income is interest earned on bond holdings through open market operations or purchase and sale of government securities.