RBI Profit: The Reserve Bank of India (RBI) has announced a record dividend of Rs 2.7 lakh crore to the government. The central bank announced this last Friday. However, most people in the country do not know where the RBI earns from, which gives such a huge dividend to the government. It is also said that the purpose of the RBI is not to earn profit, but to earn profit through its activities. It gives a part of this profit to the government as a dividend. Let us know the main sources of the RBI’s income and how it provides dividends to the government.
RBI Profits From Foreign Exchange Transactions
One of the RBI’s major functions is stabilising the foreign exchange market. To this end, it buys and sells foreign currencies like the US dollar. When the dollar is cheap, the RBI buys it; when the price rises, it sells it. RBI makes a huge profit from this difference. When the rupee weakens, the RBI brings stability to the market by selling dollars. This is a major source of its income.
Interest Income From Government Bonds
RBI is also the banker of the Government of India. It raises loans from the market on behalf of the government. For this, bonds are issued by the RBI. Interest from government bonds is the main source of income for the RBI. In 2024-25, the government got a dividend of Rs 2.69 lakh crore, more than in previous years. However, the market expected more than this. Still, this is a relief for the government, as it will reduce the fiscal deficit and facilitate inflation control measures.
Benefits to the RBI From Printing Notes
RBI is the only authorised institution to print currency in India. The cost of printing notes is low, while their actual currency value is high. For example, printing a Rs 500 note costs Rs 3 to Rs 4, but its value is only Rs 500. RBI gets additional profit from the difference between this cost and value.
Income From Investment
RBI invests in foreign bonds, US Treasury, and gold reserves. When the value of these assets increases or interest and dividends are received from them, the money becomes part of the RBI’s earnings. An increase in the price of gold also becomes a source of profit.
Contingency Risk Buffer and Dividend Distribution
RBI keeps a part of its total earnings as a Contingency Risk Buffer (CRB). This emergency fund can be used in economic crises or emergencies. As per the recommendation of the Bimal Jalan Committee in 2019, the RBI had to keep a buffer of 5.5%–6.5%, but in 2024-25, it was increased to 7.5%. Despite this, the dividend has reached a record level.
Why Is This Dividend Beneficial For The Government?
The government’s dividend from the RBI helps reduce the budget deficit. Experts believe that this will require the government to take fewer loans, which may lead to a lower interest rate in the market. If interest rates decrease, the general public can get relief on loans and EMIS.
