That is an interesting question and you must understanding the breakup of this Rs.176,000 crore. According to the latest RBI annual report, there are quite a few interesting numbers that the report has thrown up.

Out of this Rs.176,000 crore that the RBI is transferring to the government, nearly Rs.120,000 crore is by way of dividend and the balance is in the form of excess capital. Let us look at both these items separately.

1. The capital reserve is built over the years and that is the surplus that is not transferred to the government each year but is held back in reserve. The Jalan Panel that recently submitted its report, had recommended a capital level of 5.5-6% level and the RBI currently had reserves to the tune of 6.8%. According to the Jalan Panel, that was not required and hence it had recommended repaying part of the excess surplus back to the government. That is the excess capital reserve of Rs.56,000 crore that the RBI transferred to the government.

2. Now you must look at the dividend paid out. From where did the RBI get earnings to payout dividends to the government? The first source is from interest on bonds that devolve on the RBI. When the government issues bonds to borrow money, any part of the issue that is not taken up by the banks and institutions is absorbed by the RBI. During the last fiscal year 2018-19, nearly 70% of the total government borrowings devolved on the RBI and this represents the interest that RBI earned on these bonds. Effectively, the RBI prints money to fund these bond purchases.

3. The other source of revenue for the government is the profit it makes on the currency trading that it does to keep the rupee in a range through calibrated intervention. This is normally done by the RBI only when the rupee either gets too strong or too weak. Since the rupee did remain volatile through the year, there was huge intervention that RBI did and that resulted in trading profits for RBI.

4. Lastly, there are the fees for printing currency and minting coins that the RBI gets paid and that income has been high in the last few years due to the post demonetization adjustment. That also adds up to the revenues of RBI.

In a nutshell when the RBI has transferred funds to the central government, Rs.56,000 crore is out of past accumulated reserves while the balance Rs.120,000 crore is income earned by the RBI from items 2, 3 and 4. There was also a suggestion to pay the government out of revaluation of the assets of the RBI but the Jalan panel had recommended against that. This does not include any payment from the revaluation of assets.