How high is RBI’s expenditure on printing of notes in 2016-17?

When RBI announced that surplus transferred to government is Rs 30659 Cr less than Rs 65876 cr, all hopes of a government bonanza from demon were dashed. But back then we knew one major item which would have led to this decline is cost of printing notes which was expected to rise given the scale of remonetisation.

Y’day Annual report released the income and expenditure figures:

(Amount in ₹ billion)
INCOME Schedule 2015-16 2016-17
Interest 12 735.43 660.51
Others 13 73.27 -42.33
Total 808.70 618.18
Printing of Notes   34.21 79.65
Expense on Remittance of Currency 1.09 1.47
Agency Charges 14 47.56 40.52
Interest 0.01 0.01
Employee Cost 44.77 46.21
Postage and Telecommunication Charges 0.78 1.02
Printing and Stationery 0.33 0.36
Rent, Taxes, Insurance, Lighting, etc. 1.40 1.23
Repairs and Maintenance 1.01 1.02
Directors’ and Local Board Members’ Fees and Expenses 0.02 0.02
Auditors’ Fees and Expenses 0.03 0.04
Law Charges 0.07 0.06
Miscellaneous Expenses 6.42 6.96
Depreciation 2.20 1.08
Provisions 10.00 131.90
Total 149.90 311.55
Available Balance 658.80 306.63
a) Contribution to:
i) National Industrial Credit (Long Term Operations) Fund 0.01 0.01
ii) National Housing Credit (Long Term Operations) Fund 0.01 0.01
b) Transferable to NABARD:
i) National Rural Credit (Long Term Operations) Fund1 0.01 0.01
ii) National Rural Credit (Stabilisation) Fund1 0.01 0.01
Surplus payable to the Central Government 658.76 306.59
1. These funds are maintained by the National Bank for Agriculture and Rural Development (NABARD).

Interestingly, the surplus has declined on account of both decline in income (from 808.7 billion to Rs 618.18 billion) and rise in expenditure (from Rs 149.9 billion  to Rs 311.5 billion).

If we look at details of income, we realise most decline on account of interest paid due to high Reverse Repo transactions, Decline in profit on sale of Rupee Securities and Exchange loss from Foreign Exchange transactions .

Moreover, it is printing of notes category which is of higher interest which has more than doubled from Rs 34 billion to nearly Rs 80 billion. Most have reported this figure indicating a surge in printing notes which in turn has led to decline in RBI Profits.

However, this is not the complete picture. We should see how cost of printing notes has changed compared to total expenditure over a period. We dug the data from 1995-96 onwards and this is how it looks:

 (in Rs crores) Cost of Printing of Notes Total Expenditure Printing Exp as % of total exp
1995-96 372.7 4324.5 8.6
1996-97 386.5 3784.5 10.2
1997-98 834.2 4762.1 17.5
1998-99 734.0 4545.1 16.1
1999-2000 1068.4 5340.9 20.0
2000-01 1122.8 5587.5 20.1
2001-02 1304.5 6542.4 19.9
2002-03 1433.1 6723.4 21.3
2003-04 1709.6 6542.4 26.1
2004-05 1443.6 6811.3 21.2
2005-06 1034.9 5849.1 17.7
2006-07 2020.9 7164.3 28.2
2007-08 2032.2 6097.1 33.3
2008-09 2063.2 8217.9 25.1
2009-10 2754.1 8403.1 32.8
2010-11 2376.4 8655.2 27.5
2011-12 2704.0 10137.0 26.7
2012-13 2872.0 12549.0 22.9
2013-14 3214.0 11934.0 26.9
2014-15 3762.0 13356.0 28.2
2015-16 3421.0 14990.0 22.8
2016-17 7965.0 31155.0 25.6

It is interesting to see how costs of printing have been rising over the years from 8-10% in mid 1990s to 20% in 1999-00 and then to 33% in 2007-08. The average printing costs in 1990s were 14.5% of total exp, in 2000s at 24.6% and 25.8% in 2010-17.

Coming specifically to 216-07. we see that this amount of 7965 crore is easily the highest in the time-series since 1995-96. However, cost of note printing as a % of total RBI expenditure in 2016-17 is 25.6% which is hardly the highest in the series and only slightly higher than the previous year figure of 22.8%. Infact, highest cost as a % of total expenditure is seen in 2007-08 at 33.3%.

In 2016-17, cost of printing has increased by 133% but expenditure has risen by 107.8%. This is because other expenditure items have not risen as much and some like Agency charges have declined.

It is also interesting to note few years where these note costs increased.

  • This is seen in 1997-98 when it rose from Rs 386 cr to  834 cr, % of expenditure also rising from 10% to 17.5%. This was perhaps due to the new Mahatama Gandhi series of notes which introduced additional securities. RBI Annual Report’s Currency Management chapter in 2000-01 says:

Bank notes issued by different countries throughout the world contain distinct, easily recognisable security features to facilitate the detection of genuine notes vis-a-vis forgeries. Indian bank notes issued by the Reserve Bank have certain common overt security features, viz., watermark, security thread, intaglio printing, etc. The Reserve Bank, like other central banks the world over, changes the design of bank notes from time to time, inter alia, as an anti-counterfeit measure.

The Reserve Bank has introduced bank notes in the Mahatma Gandhi series since 1996 and has so far issued Rs.1,000, Rs.500, Rs.100, Rs.50 and Rs.10 notes in this series. These have been designed with a number of salient security features:

Read the chapter for detailed security features. We do not have the annual report for the year online which will have more details.

  • Another significant jump comes in 206-07 when note costs rise from 1034 cr to Rs 2020 cr, implying % of total exp jump from 17.7% to 28.2%. Here we have more clarity as annual report for the year explains the reasons:

The expenditure incurred on security printing (cheque, note forms, etc.) charges in 2006-07(July-June) increased by Rs.986.03 crore (95.3 per cent) to Rs.2,020.89 crore from Rs.1,034.86 crore in 2005-06. The increase in expenditure was on account of increase in supply of bank notes (63.9 per cent) to 11,473.3 million pieces in 2006-07 from 7,001 million pieces in 2005-06 and introduction of bank notes with additional/new security features.

  • I had also pointed above how the % cost of notes rises to 33% in 2007-08. This was mainly due to decline in total expenditure from Rs 7164 cr to 6097 cr. RBI decided not to pay interest on CRR balances that year which was behind much of the decline:

Total expenditure of the Reserve Bank decreased by Rs.1,067.12 crore (14.9 per cent) from Rs.7,164.25 crore in 2006-07 to Rs.6,097.13 crore in 2007-08 (Table 11.6 and Chart XI.2). No interest is payable to the scheduled banks on eligible cash reserve ratio (CRR) balances with effect from the fortnight beginning March 31, 2007. The expenditure, excluding interest on CRR balances, increased marginally by Rs.65.83 crore from Rs.6,029.40 crore in 2006-07 to Rs.6,095.23 crore in 2007-08.

So overall, costs of printing notes has been rising with each decade. This is because of both rising monetization of economy and rising security features in the notes. Looking at 2016-07 specifically, despite cost of printing notes at an all time high, in terms of % of expenditure terms it is not that high. It seems RBI did a reasonable job of capping its expenditure previous year despite all kinds of things going on..



One Response to “How high is RBI’s expenditure on printing of notes in 2016-17?”

  1. Muhammad Anees Says:

    From the data, I can see that income increased over the past year but expenses on printing of notes increased. How much notes were printed during the two years? Can we get a per note expenditure?

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