RBI paid government Rs 66,000 cr in dividend

The Reserve Bank of India paid a dividend of nearly Rs 66,000 crore to the government.

The amount is the highest ever in the central bank’s 80year history, and 22% more than it paid last year.

On a point-to-point basis, RBI’s dividend payment to the government is up more than four times in as many years.

How the dividend can help the Government?

1. This payment can help ease the government’s finances
2. It will help meet its fiscal deficit targets
3. It will also provide liquidity to the system so that the rate of interest remains low and also make available funds for the government’s capital expenditure

How does the RBI pay Government?

• As banker to the central and state governments and the banks in the country, the RBI has several sources of income.
• 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 exchequer.

Income Sources of RBI

1. RBI gets coupon payments on its holding of Govt securities
2. Banks borrow money from RBI for which they pay interest
3. A substantial part of Forex reserves is deployed in US T-bills and other foreign government bonds which earn interest to RBI.

Dividend Paid by RBI