Money matters at Mint road: RBI's capital reserves vs other central banks

The size of the Reserve Bank of India’s (RBI) balance sheet is Rs 36 trillion, of which 27 per cent can be broadly classified as capital reserves, that is, Rs 9.7 trillion.  Over 70 per cent of this or Rs 7 trillion comprises revaluation reserves, which track changes in Mint Road’s assets consisting mainly of foreign currency and domestic assets.
 
The change in the value of the RBI’s assets is accounted for under the revaluation reserves, with gains eventually making their way either to the government as dividends, or to funds for its day-to-day operations, or earmarked for contingency purposes. Rupee depreciation and lower interest rates tend to inflate the RBI’s currency and domestic assets respectively, offering a source of income. The RBI also enjoys seigniorage income.
 
The temporary and accounting nature of revaluation reserves has led to the concept of ‘core capital’. As of FY18, such a measure of ‘core capital’ suggests that the available capital is Rs 2.6 trillion (or 7.2 per cent of the balance sheet). It has been argued that it is inappropriate to target reserves that have already been designated for asset development and bills payable, or revaluation reserves. It leads us to “super core” capital, which further shrinks the distributable pool to Rs 2.3 trillion (or 6.6 per cent of the balance sheet).
 
International comparisons suggest the RBI’s capital reserves remain comfortable. Even the more conservative measure of “super core” capital reserves remains close to the median for key emerging economies.