The Reserve Bank of India (RBI) paid a dividend of nearly Rs 66,000 crore to the government, the highest ever from the central bank in its 80-year history, and 22% more than it paid last year.
- As a matter of fact, RBI’s dividend payment to the government is up more than four times in as many years and it exceeded the Rs 64,500 crore target that the finance minister had budgeted under ‘Dividend/Surplus of RBI, nationalized banks & financial institutions.
- As banker to the central government, state governments and the banks in the country, the RBI has several sources of income. The three main sources of income are the coupon payments it gets on its holding of government securities, the interest it receives from banks which borrow money from it (repo operations) and also interest incomes on its holdings of sovereign bonds like US treasury bills etc.
- Every year, after meeting its expenses and keeping aside part of its total profits, the central bank transfer a substantial amount to the central government as dividend.
This payment can help ease the government’s finances, help meet its fiscal deficit targets, provide liquidity to the system so that the rate of interest remains low and also make available funds for the government’s capital expenditure.