RBI balance sheet expands 10% in FY14

Entire surplus transferred to government as balances were in excess of buffer

The Reserve Bank of India (RBI)’s balance sheet grew 9.8 per cent to Rs 26,24,400 crore for the year ended June 2014, against Rs 23,90,700 crore for the year ended June 2013. The growth was due to a rise in foreign exchange assets and the impact of the rupee against the dollar.

During the year, the central bank’s gross income fell 13.1 per cent to Rs 64,617 crore from Rs 74,358 crore for the year-ago period. RBI closed the year ended June 2014 with an overall surplus of Rs 52,679 crore, 14.75 per cent less than in the year-ago period. The entire surplus was transferred to the government.

On the decision to transfer the entire surplus, RBI said after reviewing the adequacy of internal reserves and the central bank’s surplus-distribution policy, a technical panel had said the balances in the contingency reserve and the asset development reserve were more than the buffers needed.

RBI said the increase in assets was primarily due to growth in foreign currency assets and the impact of the depreciation of the dollar against other major currencies in which the Reserve Bank’s foreign currency assets were held.

In September-November 2013, RBI offered a forex swap window for banks’ foreign borrowing and non-resident deposits to rebuild buffers amid uncertainty on the global interest rate cycle and financial conditions. This resulted in capital inflows of about $34 billion, helped boost external resilience and eased domestic liquidity, RBI said.

The deprecation of the rupee against the dollar, adjusted for a fall in the value of gold reserves, also helped increase the balance sheet size.

The increase on the liabilities front was primarily due to a rise in currency in circulation and accretion to the currency and gold revaluation account, the central bank said.

As of June-end this year, domestic assets domestic assets accounted for 33 per cent of overall assets, against 36.2 per cent a year earlier.

RBI said income from foreign sources, derived from deployment of foreign-currency assets, fell 4.7 per cent--- to Rs 19,768 crore for the year ended June 2014 to from Rs 20,746 crore in the year-ago period. At 1.21 per cent, the rate of earnings on foreign-currency assets was lower for the year ended June this year, compared with 1.45 per cent in the previous year, owing to low interest rates in international markets.

Net income from domestic sources declined 16.3 per cent---from Rs 53,611 crore to Rs 44,849 crore.