Now government wants interim dividend from RBI
20 Dec 2018
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The finance ministry expects the Reserve Bank of India to declare an interim dividend from the additional surplus created by the new capital norm for the central bank, economic affairs secretary Subhash Chandra Garg said on Wednesday.
He said the expert committee on Economic Capital Framework for RBI has virtually been finalised. “Hopefully soon, it will be announced,” he said on the sidelines of an event in New Delhi.
Earlier reports said the government is seeking 3,60,000 crore out of RBI’s over 9,00,000 crore reserves, which include gold, foreign currencies, SDR, sovereign bonds etc.
Garg had then denied any government move to seek Rs3,60,000 from RBI.
Garg also said the finance ministry was likely to seek approval from Parliament for additional funding for state-run banks on Thursday. The proposal will be part of the overall supplementary demand for grants to be laid before Parliament, Garg added.
Over the last two months the government and the Reserve Bank of India have been at loggerheads on several issues, including the government’s proposal to ease capital and lending curbs for state-run banks. New RBI governor Shaktikanta Das was appointed after Urjit Patel resigned. His bureaucratic links are expected to heal a rift between the RBI and the government.
Garg said finance ministry is likely to seek approval from Parliament for additional funding for state-run banks, adding that the proposal will be part of the overall supplementary demand for grants to be laid before Parliament.
Over the past two months the government and the RBI have been clashing on several issues, including the government's proposal to ease capital and lending curbs for state-run banks.
The new RBI Governor Shaktikanta Das' bureaucratic links are expected to heal a rift between the two.
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Reserve Bank of India had, in August, transferred Rs50,000 crore of its surplus money to the government, the highest since 2015-16, in a partial relief for the latter struggling to replenish public sector banks.
The government wants RBI reserves to be recycled to recapitalise state-run banks that are neck-deep in loan losses.
The Economic Survey had suggested that the surplus with the RBI could be used to recapitalise public sector banks and improve the government’s fiscal position.
While the transfer will give the government more elbow room to infuse capital into the banks it own, taking all of RBI’s surplus cash is like killing the golden goose, as once the surplus is transferred to the government, there is little likelihood of another such fund transfer.
RBI will be releasing details its accounts later this month. Historically, large surpluses have come at the cost of transfer to contingency reserves. During the tenure of former governor Raghuram Rajan, RBI transferred over Rs65,800 crore to the government for two consecutive years.
