The RBI earns money in a variety of ways.
Open market operations, wherein a central bank purchases or sells bonds in the open market in order to regulate money supply in the economy, are a major source of income for the RBI. Apart from the interest received from these bonds, the RBI may also profit from favourable changes in bond prices.
Dealings in the foreign exchange market that the RBI engages in may also contribute to the bank’s profits. The RBI, for instance, may buy dollars cheaply and sell them dear in the future to pocket profits. It should be noted, however, that unlike commercial banks, the primary mandate of the RBI is not to earn profits but to preserve the value of the rupee. Profit and loss are thus merely a side effect of its regular operations to shape monetary policy.
The RBI’s income typically comes largely from the returns it earns on its foreign currency assets, which could be in the form of bonds and treasury bills of other central banks or top-rated securities, deposits with other central banks, the interest it earns on its holdings of local rupee-denominated government bonds or securities; when lending to banks for very short tenures (such as overnight); and management commission on handling the borrowings of state governments and the central government
On August 26, 2019 the Reserve Bank of India (RBI) central board decided to transfer ₹1.76 lakh crore to the government (including a sum of ₹52,637 crore from its contingency reserve), a move that is likely to address the Central government’s precarious fiscal situation. The transfer amount included the payment of dividend worth ₹1.23 lakh crore, and funds from its reserves, as identified under a new economic capital framework (ECF) adopted by the RBI board. The RBI had formed a committee chaired by former RBI Governor Bimal Jalan to review its ECF last year.
Previously, the amount of surplus funds that the RBI had transferred to the government was
Open market operations, wherein a central bank purchases or sells bonds in the open market in order to regulate money supply in the economy, are a major source of income for the RBI. Apart from the interest received from these bonds, the RBI may also profit from favourable changes in bond prices.
Dealings in the foreign exchange market that the RBI engages in may also contribute to the bank’s profits. The RBI, for instance, may buy dollars cheaply and sell them dear in the future to pocket profits. It should be noted, however, that unlike commercial banks, the primary mandate of the RBI is not to earn profits but to preserve the value of the rupee. Profit and loss are thus merely a side effect of its regular operations to shape monetary policy.
The RBI’s income typically comes largely from the returns it earns on its foreign currency assets, which could be in the form of bonds and treasury bills of other central banks or top-rated securities, deposits with other central banks, the interest it earns on its holdings of local rupee-denominated government bonds or securities; when lending to banks for very short tenures (such as overnight); and management commission on handling the borrowings of state governments and the central government
On August 26, 2019 the Reserve Bank of India (RBI) central board decided to transfer ₹1.76 lakh crore to the government (including a sum of ₹52,637 crore from its contingency reserve), a move that is likely to address the Central government’s precarious fiscal situation. The transfer amount included the payment of dividend worth ₹1.23 lakh crore, and funds from its reserves, as identified under a new economic capital framework (ECF) adopted by the RBI board. The RBI had formed a committee chaired by former RBI Governor Bimal Jalan to review its ECF last year.
Previously, the amount of surplus funds that the RBI had transferred to the government was
- ₹52,683 (2013-14)
- ₹65,896 (2014-15)
- ₹65,880 (2015-16)
- ₹30,659 (2016-17)
- ₹50,000 (2017-18)
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