In May, the Reserve Bank of India (RBI) paid a huge dividend of Rs 99,122 crore to the Government of India (GoI), and this is not an isolated case. How come?
The basic though simplified story is that the RBI regularly issues new money. Such issues of money hardly cost the RBI anything. But the money has purchasing power in the marketplace, given its status as the legal tender. So, the RBI has been able to “earn” massively over years. In recent years its payment to the GoI in the form of “dividend income” has gone up substantially.
A good part of
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