Indian five hundred rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Government Asks RBI To Transfer Surplus Held Back In Previous Years

The central government asked the Reserve Bank of India to transfer its entire surplus generated over the last two years as it seeks to meet its revised budget goals for the ongoing and the next financial years.

The demand comes even before a committee headed by former RBI Governor Bimal Jalan to review the rules which govern surplus transfers submits its report. The panel was formed after differences between the government and the central bank over RBI’s reserves and independence spilled out in the open.

The government requested the Reserve Bank of India to provide an interim surplus during the ongoing financial year 2018-19 from the amount withheld in the two previous fiscals, Minister of State for Finance P Radhakrishnan said in the Rajya Sabha.

The government wants the central bank to pay an interim dividend of Rs 28,000 crore in the ongoing financial year of 2018-19, Economic Affairs Secretary Subhash Chandra Garg had said after the finance minister’s budget speech. This payout will include the Rs 13,140 crore withheld in FY17, Bloomberg reported quoting unidentified official. That will take RBI’s total dividend to the government to Rs 68,000 crore in FY19. The RBI has already transferred Rs 40,000 crore to the government as annual dividend in August 2018.

For FY20, the government estimated a total payout of Rs 69,000 crore from the RBI. Since the annual dividend, which will be transferred in August 2019, may not be that large, the government wants the RBI to include Rs 14,190 crore withheld in FY18, according to the Bloomberg report.

Additional demand from the central bank for the ongoing financial year comes as the revenue from the goods and services tax, for most part of the year, has lagged the Rs 1 lakh crore monthly target. Moreover, the government’s planned stake sales in state-run firms are still short of the target even though Finance Minister Piyush Goyal remains confident of exceeding the Rs 80,000-crore estimate.

Also read: Budget 2019: Modi Turns To RBI For Fixing Fiscal Math After Populist Budget