Plugging The Deficit Hole: RBI To Pay Rs 40,000 Crore Interim Dividend To Government By March 2019

India’s central bank, the Reserve Bank of India (RBI) is expected to transfer Rs 30,000 to 40,000 crore ($4.32 billion - $5.8 billion) to the central government as interim dividend by March 2019, reports Reuters.

“We are absolutely sure that an interim dividend of more than Rs 30,000 crore would be paid before March end,” the news agency quoted a source as saying.

This transfer will help relieve the strain on government finances in the run-up to the 2019 general elections and help reign in the widening budget deficit. In Budget 2018-19, the Union Finance Minister stated that the government would limit the deficit to 3.3 per cent of GDP in the current financial year.

However, the government's fiscal deficit for the eight months between April and November 2018 stood at 114.8 per cent of the budgeted target of the entire fiscal year (FY19).

It is widely expected that the government won't be able to stick to the fiscal deficit target. Also, goods and services tax (GST) collections have been less than satisfactory to help fill govt’s coffers.

Mr Garg affirms

Earlier it was reported that Economic Affairs Secretary, Subhash Garg, when asked whether the government would seek an interim dividend from the central bank, he answered in the affirmative.

RBI, whose fiscal calendar starts in July and end in June of the successive year, paid an interim dividend of Rs 10,000 crore to the government last year.

Also Read: Why The RBI Had To Blink, And What It Can Learn From Needlessly Taking On The Finance Ministry