RBI Annual Report 2019-20: Other Income Falls, Provisions Rise
RBI transferred a lower surplus to government as its balance sheet expanded because of Covid-19 measures.
The Reserve Bank of India's income declined in the previous fiscal even as the banking regulator made higher provisions due to measures to cushion the economy from the impact of Covid-19, leading to lower surplus transfer to the government.
Total income fell 22.46% year-on-year to Rs 1.49 lakh crore in the year ended June, according to the RBI's annual report. That's primarily because other income fell by more than half to Rs 40,339 crore from Rs 86,199 crore in the previous fiscal.
The regulator earns other income from any change in valuation of the foreign exchange held by the RBI, profit or loss on sale or redemption of rupee securities, amortisation of premium or discount of rupee securities and provisions written back because they were no longer required.
Total provisions, however, rose to Rs 73,615 crore from Rs 64 crore in the previous fiscal.
Owing to larger than normal balance sheet expansion, as a result of the recent policy actions and liquidity infusion measures adopted by the Reserve Bank to mitigate the adverse shock induced by the Covid-19 outbreak, the risk provisioning required for the year (in accordance with the newly adopted economic capital framework) was higher than the previous years.RBI Annual Report FY20
Lower income and higher provisions meant that the transfer of surplus to the government fell to Rs 57,128 crore from Rs 1.76 lakh crore in the previous fiscal.
In 2018-19, the RBI changed the way it calculated reserves in line with recommendations by the Economic Capital Framework Committee headed by former RBI Governor Bimal Jalan. As a result, the regulator's contingency fund reduced to Rs 1.96 lakh crore from Rs 2.32 lakh crore in FY18.
As on June 30, 2020, a provision of Rs 73,615 crore was made toward the contingency fund, while Rs 5,925 crore was charged to the fund on account of unrealised loss in outstanding forward contracts. Accordingly, the balance in the fund stood at Rs 2.6 lakh crore.
Higher provisions toward the contingency fund increased the banking regulator's expenditure during the year. The central bank's total expenditure rose to Rs 92,540 crore from Rs 17,045 crore a year ago.
But the RBI saw its expenditure toward currency printing fall to Rs 4,378 crore from Rs 4,811 crore in the previous year as fewer currency notes were printed. Employee costs rose 30.32% year-on-year to Rs 8,928 crore due to expenditure toward accrued liabilities of various superannuation funds in FY20.
The RBI's currency and gold revaluation account, too, rose to Rs 9.77 lakh crore as on June 30 from Rs 6.64 lakh crore a year ago, mainly due to depreciation of the rupee and a rise in the international price of gold. That raised the central bank's other liabilities and provisions by 30.4% year-on-year to Rs 15.16 lakh crore.