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RBI's Annual Report
Why is it in the news?
- The Reserve Bank of India released its Annual Report (2018-19) at the month end of August.
- The RBI mentioned about some of the important aspects like banking frauds, RBI surplus, economic slowdown etc.
Highlights of the Report
Slowdown:
- Lack of domestic demand is holding back the animal spirits in the economy.
- The report also emphasised the need to revive consumption demand and private investment during 2019-20.
- There are structural issues in land, labour, agricultural marketing and the like, which need to be addressed.
- It talks about strengthening the banking and non-banking sectors.
- A big push for spending on infrastructure and implementation of much needed structural reforms in the areas of labour laws, taxation, and other legal reforms.
Banking Frauds:
- Bank frauds saw a whopping 73.8% jump in value in 2018-19 as compared to the previous year.
- In terms of number of cases, it was up 15%.
- The overall average lag between the date of occurrence and its detection by banks was 22 months.
- The average lag for large frauds, that is ₹100 crore and above, which amounted to ₹52,200 crore in 2018-19, was 55 months.
- Among bank groups, public sector banks (PSBs) have accounted for the bulk of frauds reported in 2018-19. These were followed by private sector banks and foreign banks.
RBI Surplus:
- Reserve Bank of India (RBI) has announced a huge surplus of ₹1,23,414 crore for 2018-19 (July-June accounting year).
- RBI's annual report has given two major reasons as to how RBI earn these reserves.
- First, a huge ₹28,998 crore gain from foreign exchange transactions thanks mainly to a change in accounting policy.
- Until last year, when the RBI sold dollars in the market (to support the rupee), the gain or loss was calculated based on the previous Friday’s market value of the dollar.
- This policy was changed this year to reflect the historical acquisition cost of the dollar (at around ₹53).
- This means that, if the RBI were to sell the dollar in the market today at around ₹72, it stands to gain ₹19 for every unit it sells.
- The second reason for the higher surplus is a leap in interest income which was higher by ₹32,966 crore compared to 2017-18.
- The RBI conducted several rounds of open market operations (OMO) last year to infuse liquidity leading to a 57% jump in its holding of government bonds.
Source
The Hindu.