RBI likely to give higher interim surplus to government

RBI likely to give higher interim surplus to government

AgenciesUpdated: Wednesday, May 29, 2019, 03:24 AM IST
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New Delhi: The Reserve Bank of India (RBI) is unlikely to budge from its stand of not dipping into its Contingency Fund, but may agree to transfer higher interim surplus to the government in bargain, a source aware of the development said. The RBI had transferred Rs 13,140 crore to Contingency Fund for its financial year ended June 2017. The government, however, was not amused as there was a sharp fall in the amount of surplus the central bank transferred to it during the year.

Though the interim dividend amount may be higher than the previous year, “the books for the year ended June 2017 are already closed, therefore it is very unlikely that the central bank will include funds from the contingency fund in the interim surplus,” the source told Cogencis. A banking industry source backed this, saying, it is unlikely that a re-opening of the books will be something either RBI or auditors will be happy with.

The RBI spokesperson did not respond to an e-mail sent on the subject. The Contingency Fund is the amount set aside for meeting unexpected and unforeseen contingencies, including depreciation in value of securities, and risks arising out of monetary or exchange rate policy operations. The government and the RBI have had differences over the central bank’s economic capital framework and a committee to review it was set up in December.

Speculation has been rife that the RBI may transfer over Rs 30,000 crore as interim dividend to the government before the financial year ends in March, against Rs 10,000 crore of interim surplus last year. A higher interim surplus may help the central government’s finances, which seem to be under severe strain. In Apr-Nov, the Centre’s fiscal deficit had exceeded the full-year target for 2018-19 by 15 per cent, and economists expect the target of 3.3 per cent of GDP to be missed by as much as 20-30 basis points.

The Budget for 2018-19 had pegged the surplus from the RBI at Rs 45,000 crore. The government has already received Rs 40,0oo crore in August from the RBI as remaining surplus for the year ended June 2018.

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