![]() ![]() As a central bank does not have to pay the public any interest on cash, the entire interest paid by the government is part of the income of the central bank…. belong to the government, and are normally transferred back to governments…. Sample these unedifying comments strewn across the essay: ![]() In their article, the RBI comes across as not only culpable of insensitivity to governmental or national priorities, it is also seen as being very nearly a freeloader not accountable to anybody. But another Rs 20,000 crore (Rs 200 billion) should have been better used in buying vaccines or provisioning for indemnity such as being demanded by some vaccine companies.” The surplus transfer from the RBI will provide some cushion. “This year, in the midst of the worst epidemic seen in a century and one that is pushing India into a humanitarian and economic crisis, instead of paying an additional Rs 20,000 crore (Rs 200 billion) to the government, the RBI has decided to hold back the money. The article goes on to try and drive this point home again and again at different places. This could have helped the Modi government at a time of tremendous fiscal pressure”. The subtitle of their recent article itself makes this point quite unequivocally: “The RBI has held back Rs 20,000 crore (Rs 200 billion) as provisions. ![]() Well-known economists Ila Patnaik and Radhika Pandey are convinced that the RBI could have – indeed, should have – done more. It was seen as being a case of the RBI doing the bidding of the ruling political establishment which was seriously hamstrung by a burgeoning budget deficit and falling tax revenues and didn’t mind twisting an arm to secure some extra funding.Īs generous as the latest payout has proved to be – for it exceeded the recipient’s expectations by quite a bit – it yet seems that not everyone considers it generous enough. But 2018-19 was an outlier, because in that year, the RBI had chosen to give effect, at one go, to the recommendations of the Bimal Jalan Committee on the central bank’s Economic Capital Framework (ECF), opting not only to pay out its entire annual surplus of Rs 1,235 billion to the GOI, but to release an additional quantum of Rs 526 billion by marking down its accumulated capital reserves.Ī lively debate had broken out then around that transfer, and many commentators and analysts saw it as indiscreet and avoidable – and as rather poor messaging on the part of a central bank that had, over the years, built up a formidable reputation for its professional independence. So, not only is this a very generous payout in itself, it remains the highest ever except for the year 2018-19 when the RBI transferred to the GOI a sum of Rs 1,761 billion. (*: The dip in 2017 was a direct consequence of the RBI’s depressed profits as demonetisation impacted its earnings in several different ways.) (**: For a nine-month period.) A quick look at the annual dividend the GOI received from the RBI in recent years will put things in perspective: Year The RBI’s contribution alone has now turned out to be very nearly twice that sum. In annualised terms, the dividend handed to the GOI this year works out to Rs 1,332.30 billion, which is nearly 2.4 times the dividend paid last year (which was Rs 571.28 billion).Ī quite handsome payout by all accounts, more so when one considers that, in its annual budget 2021-22, the GOI had estimated the likely aggregate dividend receipt from the RBI plus all the public sector banks together at a modest Rs 535.10 billion. The switch-over was made to align the central bank’s AY with the GOI’s. ![]() On May 22, the Reserve Bank of India (RBI) declared a dividend payout to the Government of India (GOI) of Rs 99,122 crore (991.22 billion) for the 2020-21 accounting year (AY), a nine-month (July-March) period as different from the 12-month (July-June) format the RBI had been following till 2019-20. ![]()
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