Budget factors in lower RBI dividend

The finance ministry has budgeted for a sharp decrease in the dividend payout by the Reserve Bank of India to the Centre for the year-ending June 2004.

The total dividend expected from the RBI, nationalised banks and financial institutions for the current year has been estimated at Rs 5,896.56 crore.

In the last financial year, the RBI had transferred Rs 8,834 crore to the Centre, about 14.4 per cent lower than the previous year.

The total dividend from the RBI, public sector banks and financial institutions during the current fiscal has been revised upwards to Rs 11,239.66 crore compared with the Budget estimate of Rs 10,724.64 crore.

This is partially because the finance ministry had asked public sector banks to pay interim dividends to help shore the non-tax revenue of the government.

The total dividend, including interim dividend, paid by banks and FIs during the current fiscal is to the tune of Rs 2,400 crore.

According to finance ministry sources, the lower returns on foreign exchange reserves and a drop in subscription to government securities by the RBI or in other words lower monetisation, are likely to see a fall in the total income of the central bank. Hence, the transfer of surplus (dividend) by the RBI to the government will be lower.

During the last three years, the dividend paid by the RBI to the government as a percentage of total income has seen a drop. While it was as high 42.5 per cent in 1999-2000, it stood at 38.10 per cent in 2003-04.

The gross income of the RBI for 2002-03 was Rs 23,185 crore, which was lower by Rs 1,504.70 crore or 6.1 per cent as compared to the previous year's total income. The fall in income from domestic sources was due to fall in domestic assets and lower interest rates, according to the bank's annual report.

The return on foreign current assets during 2002-03 had decreased to 2.8 per cent from 4.1 per cent in 2001-02 due to lower interest rates abroad. The income from domestic sources too had decreased by Rs 1,344.89 crore or 9.1 per cent from Rs 14,703.88 crore in 2001-02 to Rs 13,358.99 crore in 2002-03.

It, however, booked Rs 1,737.99 crore higher profits on sale of securities compared to the previous year.