THE annual report of the RBI for the financial year 2024–25, signed by Governor Sanjay Malhotra, was released on May 28, 2025. On the same day, visual and online media – and print media the following day – reported the figures related to the amount transferred by the RBI to the Government of India from its reserve fund. For FY 2024–25, the RBI transferred Rs 2,68,594.07 crore to the Government of India. A Malayalam daily reported the news under the headline “Bumper Surplus for Central Government,” while an English newspaper used the headline “Record Surplus.” Similar headlines appeared across other major dailies as well.

A year earlier, when ₹2,10,877.99 crore was transferred to the Government of India, the media had carried similar headlines. However, it is evident that the majority of media outlets made a concerted effort to give a clean chit to both the RBI and the central government on the matter. Much of the reporting emphasized that the RBI had transferred this substantial sum even after allocating 7.5 per cent of the balance sheet to the Contingency Fund – claimed to be a higher percentage than what was earmarked the previous year.

This superficial coverage of the RBI’s transfer to the government, without mentioning the  underlying factors such as the RBI’s total profit, the actual size of the Contingency Fund, or its year-on-year variation, risks projecting the fund transfer as an unqualified achievement for both the RBI and the Government of India. Such framing omits important questions about fiscal prudence, reserve adequacy, and the institutional autonomy of the central bank.

NEW WAYS OF LOOTING

The profit earned by the Reserve Bank of India (RBI) is considered part of its reserve fund. The RBI's income is primarily derived from several sources. These include: interest received from investments in Indian and foreign debt instruments, foreign investments, and financial transactions related to the implementation of monetary policy (such as repo and reverse repo operations); and earnings from foreign currency transactions, appreciation in the value of government securities, and various commissions.

On the expenditure side, the RBI incurs costs related to the printing and distribution of currency notes. For instance, on November 8, 2016, at the time of demonetisation, the RBI stated that the total value of currency in circulation stood at Rs 17.9 lakh crore. According to the most recent balance sheet, this has risen to Rs 36.87 lakh crore. Additional expenses include agency commissions and interest payments linked to the implementation of monetary policies.

The RBI’s surplus income is calculated after deducting these expenses and the amounts it earmarks for industrial and rural development. From this surplus, a portion is traditionally allocated to the Reserve Fund, which serves as a safeguard for the national economy.

Given its critical role, the RBI has historically exercised extreme caution in managing its reserve fund. Until recently, fixed portions of profits were regularly allocated to the Contingency Fund (CF) and the Asset Development Fund (ADF). The Contingency Fund is particularly significant, it acts as the RBI’s primary buffer against unforeseen economic shocks, effectively functioning as the real financial shield for the country’s economy.

In addition to these funds, the RBI also maintains a statutory Reserve Fund of Rs 4 crore, earmarked for specific credit initiatives like the National Industrial Credit Fund, National Housing Credit Fund, and National Rural Credit Fund.

Historically, it was RBI’s well-established policy to transfer the remaining surplus, after provisioning for these funds, to the Government of India. However, beginning in the 2019–20 financial year, this approach changed dramatically. The Asset Development Fund was removed from the balance sheet altogether, and contributions to the Contingency Fund were significantly reduced.

As a result, the amount of surplus transferred to the Government of India increased substantially. This undermines the core purpose of the RBI’s reserve mechanisms. The central bank is now, in effect, diverting funds originally meant to protect the economy towards government coffers, using “novel methods of appropriation.”

The top brass of the RBI leadership has been supporting this loot, which poses risks to the long-term stability of the country’s financial system.

In 2019, just ahead of the general elections, the central government reportedly asked the Reserve Bank of India (RBI) to transfer Rs 2 lakh crore from its Contingency Fund. However, the RBI board rejected the request, warning that such a move could have adverse consequences for the economy. Despite this initial resistance, history records that following the re-election of Prime Minister Narendra Modi, RBI Deputy Governor Viral Acharya resigned, and shortly thereafter, the central bank transferred Rs 1,75,988 crore to the Government of India.

An examination of the figures related to the RBI’s Contingency Fund and the amount transferred to the government since 2014-15, as illustrated in the chart below, reveals a clear shift in policy that has led to the depletion of a critical financial buffer.

From 2014-15 to 2024-25, a notable divergence emerges in the proportion of profits allocated to the Contingency Fund versus the amounts transferred to the government. Over the past eleven years, the RBI has consistently demonstrated its operational competence – managing the economy’s monetary dynamics, generating profits annually, and maintaining financial stability. However, the central government has extended its political influence into the RBI, mirroring trends seen in other constitutional institutions and public sector undertakings, by appointing individuals aligned with the ruling party to top positions.

The RBI’s primary mandate is to safeguard the economic stability of the country. Its reserve and contingency funds are intended to act as safeguards in times of financial stress. These are, by implication, public funds accumulated from public sector earnings, monetary operations, and financial oversight. Diverting large sums from these funds to the central government undermines the RBI’s autonomy and weakens its ability to respond to future economic shocks.

Despite appropriating substantial amounts, running into lakhs of crores, the central government has shown reluctance to amend fiscal policies to share these funds with state governments. Moreover, while the RBI earns through mechanisms like the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) from public sector banks, it has remained passive in addressing widespread concerns over unjust banking charges levied on the public, such as fees for ATM withdrawals, minimum balance violations, and various service commissions. Meanwhile, banks continue to write off large corporate debts without accountability.

Another area of concern is the lack of allocation from RBI profits to development institutions like the National Bank for Agriculture and Rural Development (NABARD), which was specifically created to support the rural economy.

In summary, the central government has used the RBI’s Contingency Fund to serve short-term political objectives, rather than long-term economic stability. The central government’s increasing control over the RBI, including the placement of politically loyal officials, risks eroding the institution’s autonomy and undermines public trust.

There is a growing call for public awareness and collective mobilisation to demand transparency and accountability in how the RBI’s reserves are used. At stake is the financial stability of the Indian economy itself.

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