The reserve currency.

"The board of India's central bank approved a record surplus transfer of 2.11 trillion rupees ($25.3 billion) to the government for the fiscal year that ended in March, sharply above analysts' and government projections." "The government had budgeted a dividend of 1.02 trillion rupees from the Reserve Bank of India (RBI), state-run banks and other financial institutions." This will help contain fiscal deficit for 2023-24. "India's benchmark 10-year bond yield dropped five basis points to 6.99% after the announcement, its lowest level in nearly a year." Reuters. The Revised Estimate of fiscal deficit was 5.8% of GDP in 2023-24 and was projected at 5.1% of GDP for 2024-25 in the Interim Budget presented on 1 February 2024. pib.gov.in. The RBI earned such a humongous profit from increased interest payments on $250 billion worth of US Treasuries that it holds, from interest paid on borrowings by banks, which are starved of liquidity, and from the sale of dollars. ET. But the RBI also buys dollars. "India's forex reserves jumped $2.561 billion to $644.151 billion for the week ended May 10, the RBI said." "For the week ended April 5, the reserves had hit an all-time high of $648.562 billion following multiple weeks of rise." Zee. How can the RBI make profits by selling dollars if it is buying back at the same rate of exchange? "Hypothetically, if there is a $5 billion shortage, RBI can either directly sell $5 billion to add to the dollar supply; or, it can sell $25 billion and buy back $20 billion, to generate a net supply (or sale) of $5 billion. It's the latter which the RBI did during the year." ET. The buying rate of the US dollar today is Rs 83.74 while the selling rate is Rs 81.45. Thomas Cook. Which means that we have to pay Rs 2.29 more if we buy dollars than if we sell. So, by selling $25 billion and buying $20 billion the RBI should be incurring a loss, or breaking even at best. Apparently, it is showing that the dollars it is selling were purchased in earlier years when the exchange rate was lower. Thus, if it shows that the dollars were purchased in 2014 when the exchange rate was Rs 60.95 to one dollar (Forbes) it is making a gain of Rs 20.50 for every dollar it sells. The dollars it is buying is added to the reserves and becomes an asset. This is a diabolical sleight of hand just to help the government. Can the RBI go bankrupt or can it easily plug any gap in its assets by printing money? "But there's a danger, exemplified by Venezuela in the 1980s and 1990s. The central bank pushed into insolvency by its support of the Latin American government's industrial policy, leaned too heavily on the power of cheap money-printing to earn profits and repair its balance sheet, and lost control of inflation," wrote Andy Mukherjee. The US Federal Reserve, which can print dollars, did not pay any dividend to the US government. "In 2023, the Reserve Banks increased the deferred asset by $116 billion resulting in a cumulative deferred asset at year-end of $133.0 billion. The deferred asset is the amount of net excess earnings these Reserve Banks will need to realize before their remittances to the US Treasury resume." federalreserve.gov. Not a peep out of the Biden government. Hard to imagine the fury of our government if the RBI paid no dividend. That's why the dollar is the world's reserve currency. Investopedia. And the rupee will never be.