INSUBCONTINENT EXCLUSIVE:
RBI announced the transfer of Rs 50,000 crore in dividend to government for this fiscal year in AugustThe government will likely renew its
demand for Rs 13,140 crore ($1.9 billion) in additional dividend from the central bank helmed by newly-appointed governor Shaktikanta Das,
two sources in the government told Reuters
The government believes the amount has been pending since 2016-17, when an internal formula called staggered surplus dividend distribution
method was used without consulting the government to transfer the dividend for that year, said one of the sources, who did not want to be
named as they are not authorised to speak to the media."Even though RBI in 2016-17 used their own formula it had still transferred Rs 13,140
crore less to the government in our view," the official said
"We have been asking that amount to be given to us," the official added.The central bank announced the transfer of Rs 50,000 crore in
dividend to the central government for this fiscal year in August
The government submitted a note to the RBI later that month pointing to the shortfall, said one of the sources who had seen it.Both sources
said the finance ministry was likely to combine the amount sought for this year and the pending sum from 2016-17 when it makes a formal
request next month.The finance ministry and the RBI did not respond to requests for comment
RBI officials have in the past said that reserves are an important measure of the central bank's ability to withstand any major market
volatility and, therefore, should not be reduced.Heated discussions over the revamping of the economic capital framework was one of the
reasons behind the sudden resignation of RBI Governor Urijit Patel earlier this month.The government has been sparring with the RBI on
deciding a fixed formula for transferring dividend to the government as it believes the central bank currently uses an "arbitrary"
method.The government wants to set a clear formula for transfer of the funds as the calculation of fiscal deficit and expenditures can be
upset if the amount of transfer is lower-than-expected.Delhi not only wants to have a clear dividend-sharing policy with the central bank
but is also looking to revamp the entire economic capital framework as it believes the current framework is "extremely conservative."If the
government is successful in convincing the RBI of a less conservative framework, then trillions of rupees could be freed up for government
use, according to the second source, who also did not want to be named.Such funds will be crucial to the Narendra Modi-led government, which
will look to lure voters by giving tax rebates, increasing allocation towards rural schemes and spending on subsidies ahead of a general
election that must be held by May.
