The Reserve Bank of India (RBI) has made a surprise move by halving its dividend payout to the government to only Rs 30,659 crore for the fiscal ended June 30, 2017, less than half of the Rs 65,876 crore it paid the previous year. For the year 2014-15, the RBI had paid Rs 65,896 crore dividend and Rs 52,679 crore in the year prior to that. However, the central bank hasn't given any specific reasons for the sharp fall in the surplus income for the year ended June 2017.
The government had expected Rs 58,000 crore in dividend from the RBI in 2017-18. In the Union Budget for 2017-18, the government had accounted for a dividend of Rs 74,901 crore from the RBI, nationalised banks and financial institutions for this fiscal. The dividend reduction by the RBI may put pressure on fiscal maths and the government has to find resources to meet its fiscal deficit target of 3.2 per cent for 2017-18.
Explaining the rationale, former RBI Deputy Governor R Gandhi has pointed out that for the past few years, returns have been coming down on the back of negative interest rates in the developed countries. He also explained that due to increased liquidity in the system, the RBI has been borrowing money under reverse repo and paying interest which has implications on the revenue.