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Don’t Seek Interim Dividend From RBI, Jalan Committee Tells Government

On Central government’s request, a system of the interim dividend was started in 2016-17, after demonetisation resulted in the RBI's surplus almost vanishing.

Don’t Seek Interim Dividend From RBI, Jalan Committee Tells Government
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Don’t Seek Interim Dividend From RBI, Jalan Committee Tells Government
outlookindia.com
2019-08-28T18:42:19+0530

The committee which went into the question of transferring the surplus of the Reserve Bank of India to the central government has frowned upon the practice of interim dividend that the South Block in New Delhi resorts to when there are not enough funds with apex bank under the category.

On Central government’s request, a system of the interim dividend was started in 2016-17, after demonetisation resulted in the RBI's surplus almost vanishing. A new additional Staggered Surplus Distribution Policy was added to the Economic Capital Framework developed in 2014-15 to allow money to be given to the government, even if it was not available as a surplus with the RBI.

The annual interim surplus distribution for 2017–18 amounted to Rs 50,000 crore, higher than even the Rs 38,501 crore determined by the new SSD policy. The six-member committee headed by Bimal Jalan has recommended that payment of an interim dividend may be restricted to only “extraordinary circumstances.”

The report’s recommendation on the RBI surplus was accepted by the central bank and Rs 1.76 lakh crore is to be transferred to the central government this financial year.

The Jalan committee also recommended that the RBI should align its financial year (July-June) with that of the Central government (April-March), which would provide better estimates of the projected surplus transfers to the government for budgeting purposes.

It would also reduce the need for interim dividend being paid by the RBI.

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