RBI’s Surplus

Context

The central board of directors of the Reserve Bank of India (RBI) reviewed the Economic Capital Framework (ECF). It is estimated that for the accounting year 2024-25, the RBI may transfer a record sum ranging between Rs 2.5 lakh crore and Rs 3 lakh crore as surplus to the government. In 2023-24, the RBI had transferred the highest-ever surplus of Rs 2.11 lakh crore.

What is the RBI’s Surplus?

The Reserve Bank of India (RBI), as the nation’s central bank, is owned by the Government of India.
Unlike commercial banks or public sector companies, it does not declare a "dividend" in the traditional corporate sense.
Instead, under Section 47 of the RBI Act, 1934, the central bank is mandated to transfer its surplus profits to the Central Government after making necessary provisions.
The RBI’s surplus is the excess of its income over expenditure after accounting for provisions such as:
- Bad and doubtful debts
- Depreciation of assets
- Staff welfare funds and pension liabilities
- Contingency and asset development reserves
This surplus is transferred to the Central Government under Section 47 of the RBI Act, 1934.
The RBI is exempt from income tax under Section 48 of the RBI Act, 1934.
How Does the RBI Earn Profits? The RBI earns income mainly from:

Source of Income	Description
Foreign assets	Earnings from foreign securities, treasury bills, and deposits with other central banks
Domestic government securities	Interest from rupee-denominated bonds
Lending to banks	Through mechanisms like LAF (Liquidity Adjustment Facility), MSF, etc.
Commission	For managing borrowings of the central and state governments
Other receipts	Miscellaneous income, e.g., penalty payments by banks
Expenditures include: Printing of currency notes Staff salaries and pensions Commission to banks and dealers

Formal policy on surplus distribution

Although there is no law mandating a fixed surplus transfer formula, an important framework governs this process.
The Economic Capital Framework (ECF), introduced after the Bimal Jalan Committee recommendations in 2019, determines the size of contingency reserves and the share of realised surplus to be transferred.
The framework aims to balance two objectives:
- Maintaining the RBI’s financial strength and independence through adequate reserves
- Ensuring reasonable surplus transfer to the government
Before this, the Malegam Committee (2013) had recommended higher transfers, which led to the RBI transferring nearly 99.99% of its surplus in some years.
Global practices: Like in India, central banks in both the UK and the US decide after consultations with the government. But in Japan, it is the government that decides.
- By and large, with a few exceptions, the quantum of surplus transfer averages around 5% of the GDP.