Interim dividend issue may come up at RBI board’s next meeting

The issue of the interim dividend may come up for discussion in the next Reserve Bank board meeting as the government struggles to meet its ambitious fiscal deficit target of 3.3% amid revenue shortfall, sources said.

Government finances have come under pressure due to moderation in revenue collection and a slew of measures taken to lift growth from over six-year-low of 4.5% in the second quarter of the current fiscal.

As per the government’s estimate, the country’s GDP growth is seen dipping to an 11-year low of 5% in the current fiscal as compared to 6.8% in 2018-19.

There would be at least one board meeting of RBI before this fiscal comes to an end, the issue of the interim dividend could be raised by government nominee directors in the meeting, sources said.

However, the board meeting would be preceded by Finance Minister Nirmala Sitharaman customary address to the central board of RBI to explain the vision of the Budget to be presented on February 1. This traditional exercise takes place a few days after the Budget presentation every year.

According to sources, it has been an exceptional year during which several extra-ordinary measures including slashing corporate tax rates outside the Budget were announced putting government finances under stress.

If the RBI board agrees to an interim dividend based on their six-month performance, it would provide some financial relief to the government, sources added.

Reserve Bank of India (RBI) follows July to June financial year.

The RBI largely earns profits through its trading of currencies and government bonds. Part of these earnings is set aside by the RBI for its operational and contingency needs while the rest is transferred to the government in the form of a dividend.

In the past, the government has taken the route of seeking interim dividend from the RBI to balance its account. Last fiscal, the RBI paid Rs 28,000 crore as interim dividend. During 2017-18, the government received Rs 10,000 crore as interim dividend from the central bank.

Last year in August, Governor Shaktikanta Das-led RBI central board gave its nod for transferring to the government a sum of Rs 1,76,051 crore, comprising Rs 1,23,414 crore of surplus for the year 2018-19 and Rs 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF).