- RBI, a not-for-profit organization, recorded a substantial profit of nearly ₹2.20 lakh crores in FY23 largely through seigniorage, the profit from printing currency.
- Seigniorage is achieved when the RBI prints currency notes at a minimal cost, then circulates them to banks who pay the full face value, resulting in significant profits for the central bank.
- These profits are utilized by the RBI for various financial activities, such as lending to banks, purchasing government bonds, acquiring foreign assets like US government bonds, and trading in foreign exchange, resulting in considerable gains.
- In FY23, the RBI earned a staggering ₹2.35 lakh crores, significantly higher than the previous year, with minimal expenses totaling around ₹15,000 crores.
- Not being liable to pay income tax as a non-profit entity, the RBI primarily channels its profits into a contingency fund, allocating ₹1.30 lakh crores for unforeseen economic emergencies.
- Remaining profits, approximately ₹87,000 crores, are transferred to the government as a dividend, aiding government expenditures, including infrastructure development, social welfare schemes, and other expenses, reducing the need for borrowing and interest payments.