Mumbai, Aug. 10: The Reserve Bank of India has stepped forward once again to prop up the foundations of the government’s resource base.
On Sunday, the central board of directors of the RBI approved the transfer of surplus amounting to Rs 52,679 crore to the government. The surplus transfer will be made tomorrow.
The sum is almost 60 per cent higher than the amount of Rs 33,010 crore that the RBI had decided to transfer to the government at the end of its accounting year ended June 30 last year.
In February this year, the RBI had come under pressure from the finance ministry and agreed to pay out a higher surplus, or dividend, than it had intended to in July last year.
“As against Rs 33,000 crore proposed in the interim budget, actual dividend from the RBI stands at Rs 46,000 crore,” the government said in its medium-term fiscal policy statement last month, a document that is issued along with the Union budget.
“Over the past years, the RBI has been setting aside a portion of its profits as reserves before declaring dividend to the central government. Over the years, sufficient balances have been built up in various reserves and, as such, the RBI has decided to pass on higher dividend to the government. Accordingly, the dividend declared in 2014-15 has been revised upwards,” the document added.
Finance minister Arun Jaitley had budgeted for a dividend payout from nationalised banks, financial institutions and the RBI surplus of Rs 62,414.18 crore this fiscal — a 38.3 per cent increase over the revised estimate of Rs 45,113.35 crore for 2013-14.
The RBI surplus accounts for over 80 per cent of the total dividends and surplus that it gets from banks and financial institutions.
A major source of the RBI’s income comes from the deployment of its foreign currency assets overseas. In the domestic market, it earns money from the sale of securities, conduct of repo and reverse repo auctions, offering funds to banks under the marginal standing facility, and the government’s cash management operations through the so-called ways and means advances.
The RBI has to set aside funds to take care of interest payment, establishment costs and contingency requirements. The surplus funds, if any, is transferred to the government.
By deciding to fork out Rs 52,679 crore this year, the RBI will once again be jumping to the rescue of the government, which has taken on the extremely difficult task of achieving a fiscal deficit target of 4.1 per cent of the gross domestic product.
With the economy stuttering in the past two years, the increase in tax revenues has been muted and the government has had to rely on non-tax revenues such as dividends from banks and public sector units to put a lid on its fiscal deficit.
Non-tax revenues have been budgeted to rise 6.7 per cent in 2014-15 over the actual for 2013-14. But this represents a substantial growth of 23.4 per cent over the budget estimate for 2013-14.
Over the past two years, the government has been relying on non-tax revenues to bail it out of a sticky situation with overall expenditure continuing to surge.
“The increase in non-tax revenue in 2013-14 has been one of the steepest in recent years and it has now grown in volumes to be equivalent to one of the indirect tax receipts,” the government said in the fiscal policy strategy statement.