Impact: Neutral to Negative (Fiscal Deficit) – Conditional to no further interim payout

Brief: RBI's FY18 dividend payout to the Government of India is almost equal to that of FY17. The payout as a percent of total dividend earnings of the Government of India is lowest since FY13.

The RBI's FY18 dividend payout for the Government of India (GOI) amounts to Rs. 50,000 crores. This incorporates Rs. 40,000 crores for the current fiscal (FY19) and Rs. 10,000 crores of the previous fiscal (FY18). Since the RBI definition of a financial year is July – June, the payouts stretching beyond the Government's fiscal are recorded in the next year. RBI's FY18 payout therefore includes the dividend of March 2018, which was recorded by the Government of India in its previous fiscal, which ended on March 31st.

Going by this definition, the payment received by the GOI is Rs. 600 crores less than what it received collectively in FY18. If no incremental interim payout is announced during the course of this year, the figure could remain lower than the previous fiscal. With the payment of the incremental Rs. 10,000 crores last year, GOI managed to shave off 6 bps from its fiscal deficit to around 3.49% (of FY18 GDP). This fiscal however, no such help can be ascertained – at least until an interim payout is announced.

As per our assessment, while considering the total dividend earnings of GOI, the current payout is the lowest since FY13. At 37%, RBI's share in GOI's total dividend earnings is lower than previous year's 38%. Even in the year FY17, which saw the destabilizing demonetization exercise, the share was a very strong 54%. Lately, the value created by RBI's currency and debt market operations have driven the earnings of the central bank higher – translating into higher dividends for the Government of India. However, expenses related to currency printing, recalibration operations as well as higher provisioning towards RBI's Contingency Fund has reduced recent payouts to GOI. The RBI's declining share in the overall dividend earnings of the GOI at the time when most PSBs are unable to contribute comes as a surprise. Unless incremental/ interim dividend payout is announced, we continue to assess the development as a fiscal negative.

Source: CMIE; * Actual RBI Payout; # Acuité Estimate