Bimal Jalan panel to meet in Feb-end to study fund transfer models

New Delhi: The Bimal Jalan panel on the Economic Capital Framework would meet towards the month-end to examine different models adopted by central banks globally to transfer funds to governments and decide on the suitable model. Sources said the Finance Ministry might also seek the panel’s advise on the interim dividend payments held back by the Reserve Bank for the years FY2017 and FY18.

The RBI's Central Board will meet on February 18 to consider the audited results and interim finance minister Piyush Goyal will address them to brief on the Budget decisions as part of the custom. The board is expected to clear the interim dividend on that day.

Audit of the RBI books has been done for the six-month period of July-December 2018, since RBI follows a July-June financial period. The expert panel constituted for the purpose will also be consulted and kept in the loop on this, sources said.

The report of the panel is expected in April. But the sources said the panel may be given more time if need be. The report, as and when submitted, will be applicable prospectively. For the Centre’s current fiscal year, the RBI has already paid Rs 40,000 crore in dividend last August and the Centre is seeking another Rs 28,000 crore in interim dividend.

The government had requested the RBI to provide an interim surplus during the current financial year from the amount withheld in the two previous fiscals, Minister of State for Finance P Radhakrishnan had said in the Rajya Sabha. The Rs 28,000-crore interim payout could include the Rs 13,140 crore withheld in FY17, which was transferred to the Contengency Fund by the central bank. The interim dividend would take total dividend to the government to Rs 68,000 crore in FY19. For FY20, the estimated total payout is Rs 69,000 crore. The annual dividend coming in August 2019, the government insists, should include Rs 14,190 crore withheld in FY18.

The idea behind keeping the Jalan panel in the loop is that the dividend paid in the demonetisation year of FY17 was just Rs 30,659 crore, as the central bank incurred additional expenses on printing new currency notes. For July 2017-June 2018, the RBI had paid Rs 50,000 crore as dividend, of which Rs 10,000 crore was transferred to the government on March 27. Any interim dividend now will be part of its July 2018-June 2019 financial year. The revised 2018-19 estimate for dividends from the RBI, banks and financial institutions is Rs 74,140 crore, compared with the budgeted estimates of Rs 54,817 crore.

Meanwhile, a finance ministry official on Wednesday said the government expects the central bank to pay a dividend of Rs 69,000 crore in the next financial year beginning April 2019.

Piyush Goyal, in his annual budget for 2019/20 tabled in Parliament last week, said the ministry expected to get Rs 82,911 crore through dividend from banks, financial institutions and the RBI in the next financial year.

The demand for transferring a higher share of RBI reserves to the government had become a thorny issue in the relations between the central bank and the Finance Ministry. The expert committee under former governor Bimal Jalan is currently reviewing the status and the need of these reserves.

The Finance Ministry has asked the RBI to transfer the surplus held back in previous years of 2016-17 and 2017-18. Since the demand from the government comes while the expert committee under Jalan is reviewing the rules governing surplus transfers, the sources said, the audit panel would keep the Economic Capital Framework committee in the loop over the decision taken on the interim dividends.