The government needs cash after allocating ₹20,000 crore toward the first installment of the $10.5 billion programme by 31 March.
The finance ministry has also asked the central bank to transfer about 270 billion rupees of surplus capital withheld by it in the previous two financial years. The RBI dividend will help Modi's government partly bridge a budget gap and could be key to funding an income support program for farmers ahead of a national vote due by May.
The Reserve Bank of India held a meeting of the Central Board Monday in New Delhi where it declared that it will give Rs 28,000 crore as interim dividend to the government for the half year ended December 31, 2018.
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As per the Budget document, the government expects Rs 82,911.56 crore as dividend/ surplus of RBI, nationalised banks and financial institutions during 2019-20. In FY18, the dividend received by the government from the RBI stood at Rs 50,000 crore.
In approving the measure, RBI is emulating Turkey's central bank that came to the aid of its government before municipal elections in March seen as a referendum on President Recep Tayyip Erdogan's rule.
Under then governor Raghuram Rajan, RBI had paid a dividend of Rs 65,896 crore and this was followed by a dividend of Rs 65,876 crore in 2016-17. Minister of State for Finance Shiv Pratap Shukla, Finance Secretary Ajay Narayan Jha, Revenue Secretary Ajay Bhushan Pandey and Chief Economic Advisor K Subramanian also attended the meeting.
The RBI had earlier this month cut the benchmark interest rate, repo rate, by 0.25 per cent to 6.25 per cent, in what was Das' first monetary policy meeting. "India needs fewer and mega banks which are strong because in every sense from borrowing rates to optimum utilisation, the economies of scale as far as banking sector is concerned are of great help", Jaitley said. Earlier, SBI's five associates and Bharatiya Mahila Bank were merged with SBI in 2017.