Dividend cut on 30% balance sheet growth

MUMBAI: The Reserve Bank of India (RBI) transferred Rs 73,615 crore to its contingency fund as compared to last year when it took out Rs 52,637 crore as write-back of excess provision. This left the central bank with a lower surplus of Rs 57,128 crore, which was transferred to the government as dividend. The provisions are made in proportion to RBI’s balance sheet, and in 2019-20 the balance sheet expanded by 30% to Rs 53.3 lakh crore.
According to the annual report, RBI’s income declined 22% to Rs 1,49,672 crore while total expenses (including provisions) rose more than five times to Rs 92,540 crore.
One of the reasons for the increase in balance sheet size was RBI’s activity in the financial markets. This resulted in forex reserves increasing by $59.5 billion in 2019-20 as compared to depletion of $3.3 billion in the previous year. During the year, the RBI increased its physical holding of gold from 618 tonnes to 661 tonnes.
The RBI has said that there has been an improvement in various external sector vulnerability indicators, which include the ratio of external debt-to-GDP and the nature of the debt. Despite these improvements, the current year is expected to be challenging and this is “due to a highly uncertain global trade and investment environment, and extreme fear and uncertainty about the intensity and spread of Covid-19”, the RBI said.
While terms of trade gains may provide some respite, the outlook is uncertain for exports, remittance inflows and the tourism sector.