How RBI Became The World’s Richest Central Bank?

As compared to RBI’s Rs 2.69 lakh crore surplus in FY25, most other leading central banks have reported big losses

While the Reserve Bank of India (RBI) is not focused on generating profits, its operations naturally create profits. Central banks of other top economies also follow a similar approach, although overall profits or losses may vary. In FY25, the Reserve Bank of India has emerged as the richest central bank in terms of its surplus income. Let us take a look at how RBI became the world’s richest central bank.

Interest on government securities – Central banks like RBI usually hold a large stake in bonds and treasury bills issued by the government. Through this portfolio, the central bank earns a large amount of interest. For example, RBI’s portfolio of Indian government securities was valued at Rs 15.6 trilling, as of March 2025. The RBI earned around Rs 1 lakh crore, just through its government bond holdings in FY24.

Foreign exchange operations – Central banks like the RBI manage a country’s foreign exchange reserves. That involved buying and selling of foreign currencies including the US Dollar. As prices fluctuate and depending on the situation, the RBI earns profits from such transactions. For example, the RBI’s foreign exchange transactions were valued at around $153 billion in FY24. And per dollar earnings were estimated to be around Rs 8. Overall, this helped the RBI to earn Rs 1.2 lakh crore.

Seigniorage – This is the earning that comes from the difference in cost of printing and the face value of the printed currency. For example, the cost of printing a Rs 500 note is quite small. But RBI earns the full Rs 500 value when it provides this currency to commercial banks.

Interest from lending to banks – Commercial banks borrow funds from the RBI via facilities like the liquidity Adjustment Facility (LAF) or Marginal Standing Facility (MSF). These funds are given at market rates with the purpose of managing liquidity and inflation. The RBI earns interest on these loans. However, this setup can also lead to losses in years when banks park surplus funds with the RBI.

Fees and commission – Central banks like RBI earn a wide variety of fees and commission from various sources. It can come from managing government debt or handling borrowings on behalf of central and state governments. RBI also earns money from providing banking services to commercial banks.

As is evident, the RBI has various sources of income. And as per the Section 47 of the Reserve Bank of India Act, 1934, the RBI is mandated to transfer any surplus to the central government. This surplus transfer is referred to as the RBI dividend. The surplus is calculated after deducting the operational expenses and allocating funds for reserves from the overall income. In FY25, the RBI transferred a record surplus of Rs 2.69 lakh crore to the central government.

In comparison, other leading central banks such as the Federal Reserve (United States) reported a loss of $77 billion. Similarly, the losses of the Bank of England, European Central Bank (ECB) and the Bank of Canada were at $40 billion, $9 billion, and $2.6 billion, respectively. Such heavy losses were primarily attributed to high interest rates and bond portfolio devaluations. It explains why the RBI emerged as the richest central bank in terms of surplus income in FY25.