Statsguru: Six charts explain RBI's annual earnings report for FY23

India’s central bank posted over Rs 2 trillion in earnings. The Reserve Bank of India (RBI) came out with its annual report last week, showing that the balance sheet had continued to expand in the financial year 2022-23 (FY23), though at a slower rate. It grew 2.5 per cent over the previous year to Rs 63.4 trillion. It is over 50 per cent larger than the pre-pandemic period (chart 1).

Central banks across the world have expanded balance sheets to support their economies during this time. Many are now looking to reverse the process. The RBI has managed to navigate the resultant volatility in global financial markets. It recorded a 47 per cent rise in income for FY23, ending the year with Rs 2.35 trillion in earnings. This year’s number was higher than in FY19, which had the tailwind of excess risk provision writeback (chart 2).

Foreign currency asset earnings helped income in FY23. Earnings from foreign currency assets were Rs 1.5 trillion, nearly double that of earnings from domestic sources (chart 3).

The RBI’s total expenditure figure has also risen to Rs 1.5 trillion. This followed a decision to increase the contingent risk buffer (CRB) to 6 per cent of the RBI’s balance sheet, which translated into a provision of Rs 1.3 trillion. Employee expenses rose 55 per cent to over Rs 6,000 crore over retirement fund liabilities (charts 4, 5).

Higher earnings have meant a bigger surplus transfer to the government, noted a Nomura Group analysis. It, however, added that the windfall of nearly Rs 50,000 crore is likely to be neutralised by higher-than-expected fertiliser subsidies.

The RBI is set to transfer over Rs 87,000 crore to the government. Budget estimates for dividends from the RBI, nationalised banks, and financial institutions were Rs 48,000 crore.

A larger central bank balance sheet is often seen to result in higher inflation globally. However, a June 2022 RBI paper suggested that the size of the RBI’s balance sheet doesn’t necessarily have a strong effect on India’s inflation outcomes.