What is likely to be the dividend that the RBI will pay to government this year?

With the government under severe fiscal constraints, the phones at the RBI have apparently started ringing for a higher dividend transfer. The central board of RBI will meet on 14 August to discuss the dividend transfer to the government. It may be recollected that the government has budgeted Rs.60,000 crore as dividends from RBI and state-run banks in the Union Budget 2020-21.

Back in mid-2019, the RBI had transferred Rs.176,000 crore to the central government for the year to June 2019 which included Rs.52,637 crore of excess contingent reserves. This was as per the recommendations of a panel headed by Dr. Bimal Jalan which had approved a record dividend and an interim dividend only as an exceptional case.

RBI has not paid any interim dividend to the government for the year ended on June 2020. However, with COVID pressures and the government scaling 83% of its fiscal deficit targets in 3 months, the government is already counting on the RBI to bail them out.