No bonanza for the government from cash destruction8 min read . Updated: 17 Nov 2016, 03:47 AM IST
Cancellation of some currency notes would increase the net worth of RBI but not its cash income that comes from interest payments and out of which seigniorage is paid
There is a meme circulating that the government will reap a kind of windfall gain from its monetary coup d’état. To the extent that some portion of these notes will remain unexchanged by the deadline, the argument goes, these notes will stand cancelled as liabilities of the Reserve Bank of India (RBI). With its liabilities thus reduced, the RBI can afford to fork over more surplus, known as seigniorage, to the government as a one-time bonanza.
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