InvestorQ : Why was the RBI dividend to the government so much lower in this current fiscal year?
Anjana Aiyar made post

Why was the RBI dividend to the government so much lower in this current fiscal year?

Answer
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Khushi Patel answered.
2 months ago


For the financial year 2019-20 of the RBI Financial year which begins in July and ends in June, the RBI transferred Rs.57,128 crore to the as dividends. This will be included in the revenues of the Indian government the fiscal year FY21.

In the Union Budget presented in February this year, GOI had estimated Rs.90,000 crore for FY21 as dividends. This included Rs.60,000 crore as dividend from RBI and around Rs.30,000 crore for other PSU institutions. RBI has stretched itself to the hilt. Why was it lower?

It may be recollected that in the FY-20, RBI transferred Rs.176,000 crore to the government. This included Rs.123,000 as RBI dividend payments and Rs.53,000 crore as refund of capital. RBI still has to maintain minimum 5.5% base risk capital so this was the most it could do.

Last year, RBI gained from huge open market operations or OMOs. Hence, RBI had earned additional interest of Rs.36,000 crore. Forex gains due to change in formula also yielded Rs.21,000 crore. Last year, no fresh risk provisions were needed, enabling a bigger transfer.

All these factors enabled the RBI to transfer a bigger sum last year. Also, it was the first year after the Jalan Committed and the government had literally emptied the RBI coffers to the maximum extent possible. Hence room was limited this time around.