Not as big

Not every year

What's for next year

What's for economy?

NEW DELHI: The RBI board, headed by governor Shaktikanta Das , which met in Mumbai on Monday, approved a transfer of Rs 1,76,051 crore to the government . This includes Rs 1,23,414 crore of surplus or dividend for the year 2018-19 and Rs 52,637 crore of excess provisions — a one-time transfer which is also a first for the central bank.The Reserve Bank of India has decided to deposit a record Rs 1.76 lakh crore in the government's account. However, the 'windfall' isn't as big as it seems because the government had already accounted for Rs 90,000 crore in this year's budget (80% more than it got in the previous year). Add to it the Rs 28,000 crore that the RBI had paid as 'interim' dividend in the last financial year and the 'bonanza' comes down to about Rs 58,000 crore.Read also: Surplus funds — How government pulled it offRBI's future payouts to the government will now be driven by a formula which will also put constraints on the amount paid out. RBI's reserves relevant to this payout formula broadly fall in two categories: the value of gold and foreign currency that the central bank holds (revaluation reserve) and a contingency fund meant for meeting unexpected situations. The Jalan panel has recommended that the contingency reserves be maintained between 5.5% and 6.5% of the central bank's total assets. The RBI board chose to stick to the lower 5.5% level. Since, the contingency fund now was 6.8% of assets, it allowed the RBI to pass on the balance 1.3% to the Centre (which worked out to Rs 52,637 crore). Also, since it didn't need to put a part of its Rs 1.23 lakh crore income for 2018-19 into the contingency fund (as it was above the required level), that amount too went to the government (taking the total to Rs 1.76 lakh crore).Read also: What are RBI’s surplus funds, where do reserves come from?However, from next year, there may not be an accumulated surplus in the contingency fund like this year (the Jalan panel has recommended a review every five years), bringing down the payouts. Plus, RBI's earnings were higher than usual last year because it intervened in both markets — the forex markets where it sold dollars at a huge profit and the money markets where it bought record amount of bonds that earned it higher interest. That may not be the case every year. The Jalan panel's recommendation of bringing the RBI accounting year (July-June) in sync with the fiscal year (April to March) would also put an end to the interim dividends that the central bank paid to the government.The additional non-tax revenue can help make up for the shortfall in the Centre's (direct and indirect) tax collections (government's revenue shortfall in the last financial year was Rs 1.7 lakh crore) and help meet its fiscal deficit target. If used wisely, the extra money could help stimulate the faltering economy after four consecutive quarters of decelerating growth (April-June quarter growth is likely to be the weakest in five years). It could bring down the government's borrowing and leave more on the table for industry. Or it could help energise the sectors worst affected by the slowdown (like real estate or automobiles). Bottomline: Since the windfall isn't big enough for the government to go on a spending spree, its effectiveness will depend on where the government chooses to invest the extra money.