Reserve Bank of India re-draws its financial year

To clear the air on the financial year closing, RBI has outlined a clear statement on the Fiscal 2019-20 will end on June 30, 2020 while fiscal year 2020-21 will begin on July 1, 2020 but ends on March 31, 2021.

The Reserve Bank of India (RBI) has decided to align its financial year with the Government. Finance Minister Nirmala Sitharaman and RBI Governor Shaktikanta Das at a meeting on Saturday. Das refused to comment on the AGR ruling and its implications .The decision was taken at a meeting of the RBI’s central board held in the national capital on Saturday.

“The board recommended aligning the financial year of the RBI, currently July-June, with the government’s fiscal year (April-March) from the year 2020-21 and approved forwarding a proposal to the government for its consideration,” a statement from the RBI said.

With this move, the central bank will do away with nearly eight decades of practice. The RBI, which was established in April 1935, used to follow January-December as its accounting year before it was changed to July-June in March 1940.

Taking advantage of the RBI’s different accounting year, the Centre had started demanding an interim dividend till the time the latter’s final balance sheet is prepared (usually in August).To address this anomaly, an expert committee led by former RBI governor Bimal Jalan had recommended aligning the RBI’s financial year with that of the government.

An RBI executive explained that for 2020-21, the central bank would prepare a truncated balance sheet for a period of nine months (from July 2020 to March 2021). Following next year, the full fiscal year of the RBI will start from April 1, 2021.