The Reserve Bank of India logo is displayed at the entrance to the bank’s headquarters in Mumbai, India. (Photographer: Kainaz Amaria/Bloomberg)

India’s Government Seeks Higher Transfer From Central Bank

(Bloomberg) -- India’s government is expecting a higher dividend payout from the central bank to help plug the fiscal deficit and spur economic growth.

The government estimates it will receive 900 billion rupees in income from the Reserve Bank of India, Subhash Chandra Garg, economic affairs secretary in the Finance Ministry, told reporters Friday. The government has earmarked 1.06 trillion rupees ($15.5 billion) as dividends from the central bank, state-run banks and financial institutions in the fiscal year to March 2020, according to the budget presented by Finance Minister Nirmala Sitharaman.

That’s higher than the 829.1 billion rupees estimated in February’s interim budget and 741 billion rupees pegged last year.

In February, the RBI approved 280 billion rupees as an interim dividend to the government.

The RBI pays dividends to the government every year, based on the profits from its investments and printing of notes and coins. The Finance Ministry has been seeking higher payouts, arguing the central bank is holding more capital than it needs. A panel led by former Governor Bimal Jalan is studying the RBI’s capital framework and is yet to finalize its report.

The pressure on the RBI was a contentious issue last year, resulting in a public standoff between then-Governor Urjit Patel and the government, which eventually led to his departure.

The Finance Ministry has estimated the central bank is holding 3.6 trillion rupees more capital than it needs. Former Finance Minister Arun Jaitley told lawmakers last year the money could be used to recapitalize struggling state-run banks and alleviate poverty.

©2019 Bloomberg L.P.

Bloomberg Quint

Add BloombergQuint App to Home screen.