New Delhi:
The Reserve Bank of India (RBI) on Wednesday approved a dividend payment of Rs 2.11 lakh crore to the central government for the financial year 2023-24. The decision to pay the dividend was taken in the 608th meeting of the Central Board of Directors of RBI held under the chairmanship of Governor Shaktikanta Das. This will be the highest dividend payment ever by the central bank. This is more than double the budget estimate of the current financial year.
In the interim budget, the government had estimated a total dividend income of Rs 1.02 lakh crore from RBI and public sector financial institutions.
Dividend more than doubled compared to a year ago
Apart from this, this dividend is more than double compared to a year ago. For the financial year 2022-23, RBI had given a dividend of Rs 87,416 crore to the government. The previous highest level was in the financial year 2018-19 when the Reserve Bank gave a dividend of Rs 1.76 lakh crore to the government.
The central government has set a target to limit the difference between its expenditure and revenue, i.e. fiscal deficit, to 5.1 percent of gross domestic product (GDP) i.e. Rs 17.34 lakh crore in the financial year 2024-25.
Dividends higher than the budget will help the new government
Experts believe that receiving more dividend payment than the budget will help the new government formed next month to increase spending on schemes and better manage the fiscal deficit. The results of the current Lok Sabha elections will be declared on June 4.
The RBI board of directors also reviewed the risks associated with the growth scenario and the global and domestic economic scenario. Apart from this, the functioning of the Reserve Bank during the financial year 2023-24 was discussed in the meeting and its annual report and financial statements for the last financial year were approved. RBI said that in view of the macroeconomic conditions and the outbreak of the Kovid-19 pandemic between FY 2018-19 to 2021-22, it was decided to maintain the Contingent Risk Buffer (CRB) at 5.50 percent. This was expected to support growth and overall economic activity.
The decision was taken on the recommendation of the committee headed by Bimal Jalan
RBI said that the decision regarding the dividend amount payable for the financial year 2023-24 has been taken on the basis of the Economic Capital Framework (ECF) adopted in August 2019. The ECF was recommended by an expert committee headed by Bimal Jalan. The committee had said that the risk provision under CRB should be kept in the range of 6.5 to 5.5 percent of RBI’s books.
Fiscal deficit will decrease by 0.4% in the current financial year
Kotak Mahindra Bank chief economist Upasana Bhardwaj said such unexpected gains would reduce the fiscal deficit by 0.4 per cent in the current fiscal year. “High interest rates on both domestic and foreign securities, significantly higher sales of foreign currency and limited pressure from liquidity operations compared to last year may have led to such a large dividend,” she said.
Aditi Nair, chief economist at rating agency ICRA, said this increased surplus transfer from the RBI will boost the Centre’s resource base in the current fiscal year. This will allow accelerating fiscal consolidation or increasing expenditure set out in the interim budget. Nair said, “Increasing funds available for capital expenditure will definitely improve the quality of the fiscal deficit. However, it may be difficult to spend additionally within eight months of the presentation of the full budget and parliamentary approval.”
