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. This was just Rs 20 crore less than the year ago's dividend transfer of Rs 65,896 crore. Such has been the effect of demonetization that in July this year, RBI Governor Urjit Patel had told a Parliamentary panel that the central bank wasn't through with the counting of the old notes that were returned.
The Reserve Bank's income comprises of earnings from foreign and domestic sources, with the major portion being contributed by interest receipts, complemented by relatively small amounts of income from discount, exchange, commission, etc. By that arithmetic, given that RBI is paying only Rs 30,659 crore, the amount has decreased by nearly Rs 28,000 crore for the fiscal year 2016-17.
The decline in dividend by RBI may put pressure on fiscal maths and the government has to find resources to meet its fiscal deficit target of 3.2 per cent for 2017-18.
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For the year 2015-16, the RBI had approved the transfer of surplus amounting to Rs 65, 876 crore to the government.
According to analysts, one of the reasons for the dip in the RBI's revenue was the cost of printing new currency and also return of junked notes post demonestisation. The value of scrapped notes was Rs 15.44 lakh crore, about 86 per cent of all currency.
Under attack from Congress for discrepancies in printing of currency notes post demonetisation, the RBI on Friday said it is following the best global practice and quality of notes are within "tolerance parameters". But lower payout may force the central government to borrow more from the market, widening the fiscal deficit for FY18.