Mumbai: The Reserve Bank of India (RBI) will transfer ₹1.76 lakh crore to the government this fiscal, the central bank said after a board meeting. The move could enable the government to kick-start a much needed public spending push as India Inc heads for an economic downturn.
The central bank’s board approved a transfer, which includes Rs. 1.23 lakh crore as dividend and Rs. 52,640 crore from its surplus capital, according to a statement. The dividend payment includes Rs. 28,000 crore already transferred to the government in February.
Persistent thorn: The transferred amount is three times the government average and had been the cause of a constant rift between the government and the RBI. The previous governors Raghuram Rajan and Urjit Patel had warned against the transfer of excess reserves saying that it would hit RBI’s ratings and increase borrowing costs. The incumbent governor Shaktikanta Das, however, believes that the transfer will not hit the bank’s reserves.
Recent developments: The move comes just days after Finance Minister Nirmala Sitharaman announced a slew of measures to help the economy and financial markets including a rollback of enhanced surcharge on foreign portfolio investors levied in the Union Budget.
The government will immediately inject Rs. 70,000 crore of fresh capital into state-run lenders, Ms Sitharaman said Friday as she announced a number of measures to stimulate growth from a five-year low. Data due Friday will probably show the country’s gross domestic product expanded 5.7 per cent in the quarter ended June, slower than the 5.8 per cent pace seen in the previous three months.
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