The profit a government or central bank makes from creating money, equal to the difference between the face value of the currency issued and the cost of producing it.
- Producing a high-value note or coin costs far less than its face value, so the issuer earns the gap as revenue.
- The term comes from the medieval "seigneur" (feudal lord) who claimed a charge for minting coins.
- For modern governments it is a form of revenue from money creation, distinct from taxation; excessive reliance on it can be inflationary.
- It links to concept deficit financing, because financing a deficit by printing money is in effect collecting seigniorage.
- In India, currency is issued by the RBI, whose surplus (including the gain from note issue) is transferred to the government; see concept rbi functions.
The definition (the gain from issuing money, face value minus production cost) and its link to money creation and inflation are testable monetary terms.
Seigniorage is the profit from issuing money (face value minus cost), not interest or tax; over-using it to fund deficits feeds inflation.
The government's profit from creating money: face value of currency minus the cost of producing it.