Mint Road's domestic income plunges 60%

Domestic income of the Reserve Bank of India (RBI) has fallen sharply by over 60 per cent to Rs 5,220.2 crore in 2003-04, reflecting a drop of Rs 8,138.79 crore.

The rising cost of sterilisation as the economy saw a marked increase in foreign exchange inflows was the key cause for the decline in domestic income.

Fall in money market interest rates in major countries and prices of securities as long term yields rose, led to a decline in the central bank's foreign income from Rs 9,826.65 crore in 2002-03 to Rs 9,103.5 crore during the year.

RBI's financial year is from July to June. Prior to accounting for mark-to-market depreciation in securities, the rate of earnings on foreign currency assets and gold was 2.8 per cent in 2003-04 as a against 3.2 per cent in 2002-03.

The rate of earnings on foreign currency assets and gold, after accounting for depreciation, decreased from 3.1 per cent in 2002-03 to 2.1 per cent in 2003-04.

Total income of central bank has thus fallen by over 38 per cent to Rs 14,323.7 crore in fiscal 2003 against Rs 23,185.64 crore in 2003-04.

The reduction in profit from sale of rupee securities under open market operations and higher depreciation in the value of rupee securities as well as fall interest income on account of a decline in the size of RBI's portfolio also contributed to the sharp drop in central bank's domestic income.

Interest income fell from Rs 13,064.77 crore in fiscal 2003 to less than one-third at Rs 4,872.41 crore.

The interest income on ways and means advances declined by Rs 241.98 crore from Rs 612.50 crore in 2002-03 to Rs 370.52 crore in 2003-04, reflecting decreased recourse by the central government to this facility and also the lower Bank Rate.

Interest earnings from loans and advances to banks/financial institutions declined by Rs 395.01 crore from Rs 401.13 crore in 2002-03 to Rs 6.12 crore in 2003-04 due to lower utilisation of the refinance facility by primary dealers/scheduled commercial banks combined with lower interest rates applicable on these advances.

Meanwhile, profits booked on the sale of securities amounted to Rs 2,322.62 crore in 2003-04, representing a decrease of Rs 2,475.41 crore over the previous year.