RBI Expected to Cover Government up to $5.8 Billion Dividend

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RBI

The Reserve Bank of India (RBI), has shifted management last month following a struggle with the government, is very likely to move an interim dividend of 300-400 billion rupees ($4.32 billion-$5.8 billion) to the authorities by March, according to three sources with direct knowledge of the problem.

The dividend will aid Prime Minister Narendra Modi’s administration bridge a widening budget deficit following a fall in tax collections and would come after the authorities pushed the RBI for the additional funds ahead of a federal election due by May.

Former finance ministry official Shaktikanta Das was appointed as the new governor of the RBI, following the resignation of Urjit Patel last month amid tensions on the dividend payout as well as other troubles.

The authorities and RBI have now appointed a board to explore the problem around the sharing of the RBI’s reserves.

“We are absolutely sure that an interim dividend of over 300 billion rupees will be compensated before March conclusion,” among the sources told Reuters.

The RBI didn’t respond to an email seeking comment, although the Finance Ministry declined to comment.

The capital is crucial to satisfy the fiscal deficit target of 3.3percent of the GDP for the financial year ending in March, since the government’s earnings shortfall could possibly 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 at the time Jaitley gifts the government’s funding on Feb. 1, the sources said.

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