Cost incurred due to the demonetisation exercise dented Reserve Bank of India’s (RBI) income which resulting in the central bank transferring funds — known as surplus — to the government less than half of what it did last year.
For the year ended June 30, 2017, RBI will transfer a surplus of only ₹30,659 crore to the Government of India as compared with ₹65,876 crore in the previous year. The central board of RBI, which met on Thursday, approved the amount.
This was the lowest-ever surplus transfer by the RBI to the Centre since 2011-12 when it transferred ₹16,010 crore. RBI transferred about 80% of its income as surplus in the previous three years.
“There could be couple of reasons for this decline,”said Soumya Kanti Ghosh, chief economist, State Bank of India. “I think one reason is the cost of seigniorage - which is higher the more RBI printed notes,”
There were costs of printing huge amount of new notes to replace the notes rendered invalid following demonetisation.
New notes
In November, the Centre had announced that ₹500 and ₹1,000 denomination currency notes were invalid and subsequently issued a new series of ₹500 notes and ₹2,000 notes. “It is quite possible that RBI has printed more small denomination notes like ₹100,” Mr. Ghosh said.