Demonetisation Effect: RBI halves the dividend payout to government

Reserve Bank of India

Demonetisation turns out to be a bane for government as its dividend halves this year as compared to last year.

RBI has only transferred a sum of Rs 30,659 crore as dividend to the government for the year ended June 2017 which was 65,876 crore last year. However for this year the expected divindeds were of Rs. 74,901 crore. Some economists have suggested different reasons behind this deduction in the dividends of the government by RBI.

According to Firstpost, Radhika Rao who is an economist at Singapore based DBS bank pointed out that demonetisation added to RBI’s cost burden through additional printing and destruction costs.

Meanwhile the former RBI deputy governor R Gandhi said , “ During the year foreign currency reserves of RBI were fetching less returns because most of the foreign countries were giving negative returns or very low returns. Also, throughout the year the reverse repo has been high that means that RBI has to pay to banks. The whole of last year there was surplus liquidity and RBI had to pay more interest to the banks.”

On this deduction the congress leader and former finance minister P Chidambaram said  their should be an addition of another Rs 50,000 cr as cost of demonetisation.

However RBI did not give reasons for paying less dividend.

WeForNews Bureau

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