The Reserve Bank of India’s board of directors has granted Rs 28,000 crore interim dividend to government, which was in desperate need of cash to overcome the cash deficit in current financial year.

After the interim budget 2019-20, the government had requested the central bank to make a payment of interim dividend of Rs 28,000 crore for the current financial year. The RBI has already transferred Rs 40,000 crore in the current year and an additional Rs 10,000 crore interim dividend, last year – making up to a total of Rs 50,000 for the FY 2018-19.  And on Monday, the RBI said in a statement, “Based on a limited audit review and after applying the extant economic capital framework, the board has decided to transfer an interim surplus of Rs 28,000 crore to the central government for the half-year ended December 31, 2018”.

The additional interim dividend of Rs 28,000 crore as advance payment will make up a total surplus transfer for 2018-19 to Rs 68,000 crore from the RBI treasury to Modi government. This is the second straight year that the RBI has will be giving advance payment, and money will be used to partly bridge the budget gap in the year ending March after it missed tax collection and asset sale targets. It can also be key to funding for government’s promises to start the income support program for farmers, ahead of a general election due by May.

After the receipt of the interim dividend, the government is most likely to herald its farmer cash support scheme, under which, about 120 million farmers with up to 2 hectares will receive a payment of Rs 2000 per year. Dividend payments from RBI will help the government in getting some financial space to make final economic changes in the election year.