Out of the profits it makes, it makes a minimum provisions for itself (for contingencies) and then transfers the balance surplus directly to the government. For the FY 2023-24, the surplus distribution by the RBI to the government stands at a record ₹2.11 lakh crore or Trillion. The dividend declared by the RBI for FY24 will become a receipt for the government in FY 2024-25.

For the fiscal year FY 2023-24, the total income of RBI stood at ₹2,75,572 Crore which comprises of ₹1,88,606 from interest income and ₹89,967 in the form of other income. Out of the ₹1,88,606 Crore as interest income, ₹85,428 Crore came from domestic sources while ₹1,03,178 Crore came from foreign sources.

The domestic interest income largely comes from the loans which RBI gives to the Governments through Government securities or G-Secs or to the banks through instruments such as Repo rate.

The other ₹89,967 Crore of other income comprises almost entirely of exchange gains from forex transactions. Incomes from the forex transactions is due to the difference between the average price at which it buys dollars and the average selling price. RBI buys dollars cheap and sells at high prices to the banks.

This year, the RBI has been able to transfer a much higher surplus to the RBI in the current year FY24, largely because the income earnings from the RBI investments in global securities and deposits have been sharply higher.

What is a contingency Fund?

Under the Jalan Committee recommendations, the Contingency Fund is maintained between 5.5% and 6.5% of the balance sheet of the RBI. This year, the RBI decided to raise the transfer to contingency fund to 6.5%. For FY 2023-24, the RBI balance sheet sized stood at a whopping ₹70.48 lakh crores, compared to ₹63.45 lakh crores as on the close of FY 2022-23.

The contingency fund is used as a buffer for the Indian economy from domestic and global economic challenges. The contingency fund protects the Indian economy from depreciation in the rupee and the depreciation in the valuation of securities due to the RBI monetary and forex operations. It has gone up ₹3.51 Trillion to ₹4.29 Trillion between FY23 and FY24.