The Reserve Bank of India has on Thursday paid a dividend of nearly Rs 66,000 crore to the government, the highest ever from the central bank in its 80-year history and 22% more than it paid last year.

"The Central Board of Directors of the Reserve Bank of India, at its meeting held today, approved the transfer of surplus amounting to Rs 658.96 billion for the year ended June 30, 2015 to the Government of India," the central bank said in a statement.

"This will provide more fiscal space to the government and increase planned expenditure," India Ratings Chief Economist Devendra Kumar Pant said. "This is part of non-tax receipts and will help the government bridge any shortfall, it may have, especially given the fact that first quarter direct tax growth has not been very encouraging."

"The higher fund transfer by RBI can be used by the government in recapitalizing public sector banks," CARE Ratings Chief Economist Madan Sabnavis said.

Indirect tax collections jumped by 39.1% in July, partly because of the hike in excise duty on oil last year and a withdrawal of sops on automobile and other companies from January this year. Transfer of surplus from the RBI along with dividends from the state-run banks and the public sector entities, comprise a significant chunk of the non-tax receipts. The government has projected a fiscal deficit of 3.9% of GDP for FY16, as against 4% deficit attained in FY15.

The RBI has several sources of income. The three main sources of income are the coupon payments it gets on its holding of the government securities, the interest it receives from the banks, which borrow money from it (repo operations) and also interest incomes on its holdings of the sovereign bonds like the US treasury bills etc. Every year, after meeting its expenses and keeping aside part of its total profits, the central bank transfers a substantial amount to the central government exchequer.

RBI deputy governors Harun R Khan, Urjit Patel, R Gandhi, and SS Mundra attended the meeting. Other directors of the central board present at the meeting are Anil Kakodkar, Kiran Karnik, Nachiket Mor, YH Malegam, Dipankar Gupta, GM Rao, Ela Bhatt, Indira Rajaraman and Damodar Acharya. Arvind Subramanian, chief economic adviser also attended the board meet. The meeting was attended by government nominee directors on the central board - Hasmukh Adhia, secretary of the Department of Financial Services and Ajay Tyagi, additional secretary (investment) in the Department of Economic Affairs.

By Premji