New Delhi: The Reserve Bank of India (RBI) has decided to transfer an additional ₹28,000 crore as dividend to the government beyond the ₹40,000 crore it has already paid during the year as surplus from its 2017-18 operations.

The move could help the government meet its revised fiscal deficit target of 3.4% of GDP in 2018-19 amid a shortfall in revenue collections.

“Based on a limited audit review and after applying the extant economic capital framework, the board decided to transfer an interim surplus of ₹280 billion to the central government for the half-year ended 31 December 2018. This is the second successive year that the Reserve Bank will be transferring an interim surplus," RBI said on Monday after the meeting of its central board in New Delhi.

Finance minister Arun Jaitley addressed the RBI board as is the custom after the presentation of the budget.

The interim dividend is the future income that the RBI has prepaid, said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy. “This will have to be adjusted from its dividend payment due next year," he said.

In the interim budget, the government had revised the dividend from RBI, nationalized banks, and financial institutions to ₹74,140.37 crore for this fiscal year from the ₹54,817.25 crore estimated earlier in budget 2018-19. The interim budget estimates to receive ₹82,911 crore in 2019-20 under the same head.

RBI transfers its surplus amount to the government after making provisions for bad and doubtful debts, depreciation in assets, and contribution to staff and superannuation fund. The central bank follows a July-June financial year, while the central government follows an April-March year.

The finance ministry had informed the Rajya Sabha earlier this month that it has asked RBI to transfer ₹27,380 crore of surplus withheld for 2016-17 and 2017-18, apart from an interim dividend.

Transfers of dividends have become a bone of contention between the government and the central bank. Urjit Patel resigned from the post of RBI governor in December 2018 after alleged differences with the government on the issue.

RBI set up an expert committee in December headed by former governor Bimal Jalan to suggest how the central bank should handle its reserves and whether it can transfer its surpluses to the government. It is to submit its report by March-end.

RBI governor Shaktikanta Das, who spoke to reporters after Jaitley’s address to the board, indicated that he may prod commercial banks in a scheduled meeting on Thursday to cut interest rates after the central bank’s unexpected policy rate cut by 25 basis points on 7 February. Das said transmission of rates is important. “I am interacting with CEOs and MDs of various banks on 21 February. We will discuss the issue," he said.

Jaitley spoke to the RBI board about the fiscal situation and reform measures undertaken by the government, as well as the government’s view on the state of the economy, Das said.

On merger of public sector banks, Jaitley said India needs fewer and bigger banks that are strong in every sense, from the borrowing rate to optimum utilization.

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