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Published 19:42 IST, July 4th 2024

RBI's Rs 2.1 lakh crore dividend payout to reduce need for major divestments

The anticipated completion of the Shipping Corporation of India (SCI) sale during the year is expected to facilitate the government's FY25 target.

Reported by: Business Desk
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Reserve Bank of India
Reserve Bank of India | Image: PTI

RBI’s dividend to Government: The Reserve Bank of India's record Rs 2.1 lakh crore dividend payout is expected to reduce the need for large-scale divestments, according to a report by Care Ratings released on Thursday.

The rating agency noted that the government is likely to retain the interim budget's Rs 50,000 crore target for receipts from divestments.

"With a bumper dividend from the RBI, the central government's fiscal position remains comfortable, which may limit the urgency to push ahead with big-ticket divestments," Care Ratings stated. Should there be a shortfall in resource accumulation, the government is likely to prefer asset monetisation.

The anticipated completion of the Shipping Corporation of India (SCI) sale during the year is expected to facilitate the government's FY25 target. "After the demerger of land assets of SCI, its possible divestment looks likely in FY25, provided favourable market conditions prevail. If the government offloads its entire stake in SCI, it could generate Rs 12,500-22,500 crore as divestment proceeds," the report indicated.

Other potential divestment candidates include CONCOR and Pawan Hansthough these remain less urgent, the rating agency added.

Over the past decade, the government has raised Rs 5.2 lakh crore from divestment initiatives. The report suggests that the government could raise Rs 11.5 lakh crore by selling stakes in state-owned companies without reducing its stake below 51 per cent. Of this, Rs 5 lakh crore could come from selling stakes in central public sector enterprises, while the remaining Rs 6.5 lakh crore could be generated from stake sales in insurance firms and banks.

The government may not opt to divest all its potential holdings. Decisions regarding the divestment of listed firms may be influenced by factors such as the strategic nature of the industry, the profitability of the companies, financial market conditions, and welfare or social considerations, Care Ratings concluded. 

(With PTI inputs)

Updated 08:22 IST, July 5th 2024