The Reserve Bank of India (RBI) will pay 306.59 billion rupees ($4.78 billion) as a dividend to the government for the year ended June 2017, less than half the previous year's levels as a ban on higher currency bills raised the central bank's expenses. In the Union Budget for fiscal 2018, it was assumed that around Rs 75,000 crore would come from RBI, state-run banks and financial institutions compared with a little over Rs 76,000 crore in fiscal 2017.
The RBI, however, has not provided a reason for the lower dividend transfer.
The apex bank is expected to publish its annual reports next week. It may disturb the government's fiscal math for the current year. RBI transferred about 80% of its income as surplus in the previous three years. It is definitely going to put a strain on the government finances as the payouts by the RBI for 2015-16 and 2014-15 stood at Rs 65,876 crore and Rs 65,896 crore, respectively.
Due to increased liquidity in the system, the RBI has been borrowing money under reverse repo and paying interest which has implications on the revenue, he added.More news: The cost will be high if nuclear deal violated, Iran warns
As on November 8, 2016, the total value of currency in circulation was Rs 17.7 lakh crore.
There were costs of printing a huge amount of new notes to replace the notes rendered invalid following demonetisation.
According to India Ratings & Research Chief Economist D K Pant, the significant decline in dividend is due to reverse repo transactions, printing of notes and appreciation in rupees value against the U.S. dollar. But lower payout may force the central government to borrow more from the market, widening the fiscal deficit for FY18.