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RBI reserves ratio among the highest
Why is it in the news ?
- As per a report by consultancy firm Quantum Advisors, the RBI's reserves as a percentage of its balance sheet is among the highest.
- The data has been computed after the analysis of the balance sheets of central banks of 10 comparable economies.
More in the news
- RBI’s reserves was about Rs.10.5 lakh crore -form 26.2% its balance sheet. Only two central banks- those of South Africa and Russia- have a reserve ratio higher than this.(comparing to BRICS nations)
- The other two BRICS nations, China and Brazil, have reserve ratios of 1.7% and 0.2%, respectively.
- Though, the reserves are among the highest, the bulk of these reserves are notional and thus their value can only be unlocked when the underlying assets are sold.
- This makes transferring the excess reserves to the government all the more difficult.
- The report goes on to say that the RBI has a few options in front of it if the government does insist on the transfer of reserves. The first is for the central bank to sell its foreign bonds or government bonds, depending on how much the Centre asks for.
- The other option the RBI can opt for is that, instead of selling the government bonds, it could simply waive its rights over those bonds, thus reducing its asset holdings and reducing the government’s liabilities.
Source
The Hindu.