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To bridge fiscal deficit, RBI likely to pay govt $5.8 bn interim dividend

The dividend could help Prime Minister Narendra Modi's administration bridge a widening budget deficit following a drop in tax collections

Reuters  |  New Delhi 

Independent directors may take decisions if Govt-RBI standoff continues

The (RBI), having changed management last month following a clash with the government, is likely to transfer an interim dividend of Rs 300-400 billion ($4.32 billion-$5.8 billion) to the government by March, according to three sources with direct knowledge of the matter.

The dividend could help Prime Minister Narendra Modi's administration bridge a widening deficit following a drop in tax collections, and would come after the government pushed the for the additional funds ahead of a national election due by May.

Former finance ministry official Shaktikanta Das was appointed as the new governor of the (RBI), following resignation of Urjit Patel last month amid tensions over the dividend payout and other issues.

The government and have now appointed a panel to look into the issue around the sharing of the RBI's reserves.

"We are absolutely sure that an interim dividend of more than 300 billion rupees would be paid before March end," one of the sources told Reuters.

The did not respond to an email seeking comment, while the Finance Ministry declined to comment.

The funds are crucial to meet the target of 3.3 per cent of the GDP for the financial year ending in March, as the government's revenue shortfall may be as high as 1 trillion 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 on Feb. 1, the sources said.

First Published: Mon, January 07 2019. 13:20 IST