Table 1: RBI's Domestic vs Foreign Sources of Incomes and Assets (Rs crore)
Year
EPW
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07*
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
Foreign Sources
Amount
% to
Total Income
9,986
9,827
9,104
16,979
24,538
35,153
51,883
50,796
25,102
21,150
19,810
20,746
19,768
40.4
42.4
63.6
89.2
93.2
85.7
89.8
83.6
76.3
57.1
37.3
27.9
30.6
Domestic Sources
Amount
% to
Total Income
14,704
13,359
5,220
2,049
1,782
5,887
5,867
9,936
7,782
15,920
33,366
53,611
44,849
59.6
57.6
36.4
10.8
6.8
14.3
10.2
16.4
23.7
42.9
62.7
72.1
69.4
14,492
13,065
4,872
1,607
1,207
5,145
4,958
9,056
6,647
15,032
32,339
52,306
43,538
58.7
56.3
34.0
8.4
4.6
12.5
8.6
14.9
20.2
40.6
60.8
70.3
67.4
7.4
8.4
5.5
1.6
1.2
4.7
4.7
5.3
2.9
3.6
5.3
6.8
5.0
vol xlIX no 42
87
ECONOMIC NOTES
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
Foreign Assets
Amount
% to Total
(Rs Crore)
Assets
2,23,565
3,17,297
4,38,958
5,51,660
6,29,067
7,70,814
10,75,985
12,19,693
12,03,829
12,17,751
13,47,755
14,28,158
16,36,893
Source: As in Table 1.
88
53.5
67.0
83.3
84.7
86.1
87.5
91.0
87.6
84.2
74.3
68.7
64.9
65.3
Domestic Assets
Amount
% to Total
(Rs Crore)
Assets
1,94,554
1,56,365
88,289
99,978
1,01,304
1,10,227
1,06,413
1,72,221
2,25,374
4,22,033
6,14,050
7,72,484
8,69,477
46.5
33.0
16.7
15.3
13.9
12.5
9.0
12.4
15.8
25.7
31.3
35.1
34.7
their relative propo- Chart A: Percentage Share of Domestic Income in Total Income and
Domestic Assets in Total Assets
rtions, as depicted 71
in Chart A. In recent
58
years, during 2010-11
but particularly during 45
Domestic income share
2011-12 and thereafter, 32
when the share of
Domestic assets share
19
domestic incomes shot
up, there was no corre- 6
2002-03
2004-05
2006-07*
2008-09
2010-11
2012-13 2013-14
sponding rise in the
share of domestic assets (Table 2). While it was only the amount in excess of the
the income share shot up from about requirements for the CR that were to
23.7% in 2009-10 to the range of 62.7% accrue as profit to the government. Furto 72.1% in the latest three years, the ther reinforcing the point emphatically,
assets share has just edged up from TC-I writes, The Committee recom25% to around 35% during the same mends that adequate amount of the profperiod (Chart A). Thus, it is the sizeable its should continue to be transferred
increase in average earnings on domes- each year to CR (RBI 2013: 21).
When such an assertive statement
tic assets through higher interest rates
that explains the changes in relative was made, there was no scope for any
proportions between domestic incomes ambiguity about the need for any further review. To appreciate the nature of
and assets.
provisions that the RBI should be makThe Tale of Two Committees
ing, TC-I had examined the practices
In the preface to its accounts in the followed by 18 central banks. Given the
annual report of 2013-14, the RBI writes fact that in India, RBIs capital and
about Technical Committees I (TC-I) and II Reserve Fund together are wholly
(TC-II) that were appointed to review the inadequate in the context of the total
form of presentation of accounts and the assets of the Reserve Bank.... it is necespolicies relating to reserves provisioning, sary that the Contingency Reserves are
etc. It opines that Shri Y H Malegam built up (RBI 2013: 19). In this context,
(Technical Committee I) observed that the TC-I had the back-up of the recomthe existing policies relating to reserves, mendations of two earlier RBI commitprovisioning and accounting norms tees Subrahmanyam Group in 1997
needed to be examined in detail (RBI and Usha Thorat Group in 2005. The
2013: 136). As a follow-up, another Tech- Usha Thorat Group had settled on a
nical Committee II (also chaired by: much higher reserve adequacy ratio of
Y H Malegam) was constituted during 17.76% of total assets, rounded off to
2013-14 to review the level and ade- 18%, but it was not accepted by the RBI
quacy of internal reserves and surplus Central Board. The 12% norm affirmed
distribution policy of the RBI. But, by Malegam Committee-I was based on
intriguingly the report of TC-I has been the recommendations of the Subrahpublished, but that of TC-II remains manyam Group. This group took into
under wraps so far.
account the need for (a) possible losses
Interestingly, the TC-I report does not arising out of money and forex market
mention that the existing policies relat- operations, (b) shocks arising out of
ing to reserves, etc, need to be examined changes in exchange rates and gold
and that therefore, it needed a new com- prices, and (c) protection of assets from
mittee. In fact, TC-I was categorical that systemic risks, as also the cost of RBIs
the indicative target of 12% of total developmental role.
assets for transfer from gross profits to
Against this background, the absence
Contingency Reserves (CR) was intended of any transfer to CR and Asset Developto be the minimum level to be achieved ment Reserve (ADR) is now indeed sureach year (RBI 2013: 21). It further said prising. If TC-II had been placed in the
that the actual levels could be deter- public domain, we would have got a
mined based on circumstances and that sense of the rationale for this new
october 18, 2014
vol xlIX no 42
EPW
ECONOMIC NOTES
EPW
2008
2009
2010
2011
2012
2013
2014
Total of
Contingency
Reserve and Asset
Development
Reserve
2
1,39,973
1,67,474
1,73,193
1,86,594
2,13,619
2,42,413
2,42,413
Asset as
per RBI
Balance
Sheet
3
14,62,983
14,08,194
15,53,058
18,04,666
22,08,945
23,90,711
26,24,367
CR+ADR as
% to Total
RBI Asset
(2 as % 3)
4
9.6
11.9
11.2
10.3
9.7
10.1
9.2
Source: As in Table 1.
89