RBI likely to transfer additional funds to govt this fiscal year

UNION BUDGET 2018 - The Reserve Bank of India (RBI) is likely to transfer additional funds to the government this fiscal year. The finance ministry has been seeking Rs 430 billion in dividends from the RBI against the Rs 306.5 billion that the central bank has already paid for 2017-18.

The additional funds would give some relief to the government as its task of reining in the fiscal deficit at 3.2 per cent of gross domestic product (GDP) became tougher due to lower economic growth in nominal terms (current prices) than was estimated in the Budget for 2017-18.

Among the revenue items in which the finance ministry stares at a potential shortfall this year are dividends from state-owned companies, banks, and the RBI. The combined target is around Rs 1.4 trillion.

An official has said that the RBI had agreed to pay an additional sum but did not elaborate what that amount could be.

The RBI had transferred Rs 131 billion to its contingency fund for its accounting year ended June 2017. The fund represents the amount set aside for meeting depreciation in the value of securities and risks arising out of monetary or exchange rate policy operations. As on June 30, the balance in the RBI’s contingency fund was Rs 2.28 trillion.

The first Advance Estimates for GDP growth in 2017-18, released on Friday, indicate that the fiscal deficit as a percentage of the nominal GDP would come in at nearly 3.3 per cent, against the target of 3.2 per cent, even if the deficit is retained at the budgeted number of Rs 5.46 trillion.