India: RBI expected to pay govt up to INR400bn interim dividend: Report

  • The Reserve Bank of India (RBI), having changed management in Dec 18 following a clash with the government, is likely to transfer an interim dividend of INR300bn-INR400bn to the government by Mar 19, according to three sources with direct knowledge of the matter.
  • The dividend could help Prime Minister Narendra Modi’s administration bridge a widening budget deficit following a drop in tax collections, and would come after the government pushed the RBI for the additional funds ahead of a national election due by May 19.
  • Former finance ministry official Shaktikanta Das was appointed as the new governor of the RBI, following resignation of Urjit Patel in Dec 18 amid tensions over the dividend payout and other issues.
  • “We are absolutely sure that an interim dividend of more than INR300bn rupees would be paid before end-Mar 19,” one of the sources told Reuters.
  • The RBI did not respond to an email seeking comment, while the Finance Ministry declined to comment. However, in a media address on 7 Jan 19, the governor said the central bank will announce when any decision on additional dividend payment is made.
  • The funds are crucial to meet the fiscal deficit target of 3.3% of the GDP for the financial year ending in March, as the government’s revenue shortfall may be as high as INR1tr rupees, according to two finance ministry officials who declined to be named.
  • The RBI could make a final decision on the dividend by the time Jaitley presents the government’s budget on 1 Feb 19, the sources said.

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