What we read from the RBI Annual Report for FY24 | India Infoline (2024)

WHERE DO THE RBI PROFITS COME FROM?

People often wonder whether the RBI also has a balance sheet and income statement like other corporates. The RBI has a fairly large balance sheet. The only difference is that it does not declare profits each year. Instead, it makes the base minimum provisions and then transfers the balance surplus directly to the government. This is an annual item of inflow for the government each year and this year, the surplus distribution by the RBI to the government stands at a record ₹2.11 Trillion. Before we get into the balance sheet and the income statement of the RBI, here is a quick work on the financial year followed by the RBI.

Till about 2 years back, the RBI was following a unique financial year that started in July and ended in June next year. However, now the financial year of the RBI is also aligned with that of the government of India and extends from April to March next year. Once the financial year is completed in March, the RBI has its meeting of the Central Board, wherein the RBI books of accounts and the transfer of capital surplus to the government are approved. However, the dividend declared by the RBI for FY24 will become a receipt for the government in FY25. In the interim budget presented on February 01, 2024, the government had projected inflows of ₹1.02 Trillion from RBI surplus distribution and dividends by PSU banks combined. However, now the RBI surplus distribution itself has come in at ₹2.11 Trillion, so the overall figure will be much higher. Here is a quick look at how the surplus of ₹2.11 Crore was arrived at by the government.

HOW THE CAPITAL SURPLUS DISTRIBUTION WAS ARRIVED AT?

The table below captures how the surplus transfer to the government was arrived at by the RBI. All figures are in ₹ in Crore.

Data Source: RBI (# – the distribution by RBI to government)

The last row is the amount that is transferred as dividend by the RBI to the government. If you look at the income figure, it has been more or less steadily growing. However, the expenditure has been a lot more volatile. For example, between FY23 and FY24, the income is up by 17.04%, but the expenditure is down sharply by -56.3%. That is what explains the sharp rise in the surplus transferred to the government between FY23 and FY24 from ₹87,416 Crore to ₹2,10,874 Crore. Let us turn to the income statement of the RBI to get a better grasp of how this surplus was generated in FY24.

WHAT WE READ FROM THE RBI INCOME STATEMENT?

Here are some of the key takeaways from the income statement presented by the RBI for the fiscal year FY24.

• The total income of ₹2,75,572 Crore comprises of ₹1,88,606 from interest income and ₹89,967 in the form of other income. Now, what exactly does this interest income and other income of the RBI comprise of?
• Let us look at the interest income part first. Out of the ₹1,88,606 Crore as interest income, ₹85,428 Crore came from domestic sources while ₹1,03,178 Crore came from foreign sources. The domestic interest income largely comprised of interest on holding in rupee securities as well as a small portion as interest on loans and advances. The interest on LAF (liquidity adjusted facility) and interest on SDF (reverse repo) were negative. Let us now turn to other income break-up.
• The ₹89,967 Crore of other income in FY24 comprises almost entirely of exchange gains from forex transactions. How does this income come about. During the latest year, the government books profit on the difference between the average price at which it buys dollars and the average selling price. The RBI, during the year, was continuously selling dollars to prevent the dollar from appreciating too sharply. This activity alone generated profits of ₹83,616 Crore for the RBI in FY24.
• If you compare between FY24 and FY23, what is the one factor that has caused the sharp spike in interest income. It is the interest earned on the deposits and foreign government securities parked by the RBI. During the year, the 10-year bond yields in the US had spiked to above 4% and that was largely instrumental in the spike, combined with the sharp rise in India’s forex reserves.

The RBI has been able to transfer a much higher surplus to the RBI in the current year FY24, largely because the income earnings from the RBI investments in global securities and deposits have been sharply higher in FY24. Let us now turn to the balance sheet of the RBI.

WHAT WE READ FROM THE RBI BALANCE SHEET FOR FY24?

For FY24, the RBI balance sheet sized stood at a whopping ₹70.48 Trillion, compared to ₹63.45 Trillion as of the close of FY23. Here are some key takeaways.

• The deposits with the RBI have shot up sharply from ₹13.54 Trillion in FY23 to ₹17.20 Trillion in FY24. What exactly triggered this growth in the deposits on the liabilities side. Between FY23 and FY24, the total deposits placed by the banks with RBI has gone up from ₹9.31 Trillion to ₹10.26 Trillion. This is also part of the tightening policy that the government had continued to have briefly. The deposits from global financial institutions and banks spiked from ₹1.02 Trillion to ₹1.64 Trillion between FY23 and FY24. However, the biggest surge came from the other deposits which spiked from ₹3.16 Trillion to ₹5.26 Trillion in the latest fiscal year FY24.
• The next item on the liabilities side that has shown a sharp spike is the accretion to the Contingency Fund. It has gone up ₹3.51 Trillion to ₹4.29 Trillion between FY23 and FY24. What exactly is this contingency fund? Under the Jalan Committee recommendations, the Contingency Fund is maintained between 5.5% and 6.5% of the balance sheet of the RBI. This year, the RBI decided to raise the transfer to contingency fund to 6.5%. The contingency fund is used as a buffer for the Indian economy from domestic and global economic challenges. The contingency fund protects the Indian economy from depreciation in the rupee and the depreciation in the valuation of securities due to the RBI monetary and forex operations.
• The third item on the liabilities side of the RBI balance sheet that has gone up is the Revaluation account which has gone up marginally from ₹11.26 Trillion to ₹11.31 Trillion. The gains on this front largely emanate from the revaluation of currency and gold reserves. Since the dollar and gold have been strong in the last one year, this balance has increased in FY24.
• On the liabilities side of the RBI balance sheet, other liabilities have gone up from ₹1.35 Trillion to ₹2.61 Trillion between FY23 and FY24. This includes the provisions for all kinds of payables like forwards contracts valuations, payables, gratuity, superannuation fund, bills payable, RBI dividend to government etc. In FY24, the surge has entirely come from the sharply higher RBI distribution of dividend to the government, which has gone up from ₹87,416 Crore to ₹2,10,874 Crore.
• The last item on the liabilities side that has shone a spike is the value of notes issued. Remember, that currency notes are nothing but promissory notes issued by the government of India. The notes in circulation grew from ₹33.48 Trillion to ₹34.78 Trillion between FY23 and FY24. This figure also includes the CBDC (central bank digital currency). Let us now turn to the assets side of the balance sheet of the RBI.
• The assets side of the RBI balance sheet include the assets of the banking department and the assets of the RBI issue department, which is the backing for notes issued. Bank gold increased from ₹2.31 Trillion to ₹2.75 Trillion between FY23 and FY24. This includes the gold deposits and also the gold banks procure as collateral for gold loans.
• While the value of domestic investments of the RBI has actually gone down between FY23 and FY24, the value of the banking department foreign investments has gone up from ₹10.09 Trillion to ₹14.89 Trillion. These are the reserves invested in other countries in their treasury bills and deposits, but predominantly in dollar deposits.
• Loans and advances of the banking department is up from ₹2.89 Trillion to ₹3.76 Trillion between FY23 and FY24. In addition, other assets of the banking department also grew from ₹0.59 Trillion to ₹0.65 Trillion in FY24. The loans and advances largely pertain to loans to scheduled commercial banks in India to help them fund gaps. In addition, it also includes loans and advances to the central and state governments. The foreign reverse repo lending has also gone up sharply in the year from ₹1.02 Trillion to ₹1.63 Trillion in FY24. The growth in other assets is largely arising from accrued income, which is due but not yet received.
• Let us now turn to the final item under the head of assets of the issue department. Under this head, the issue department gold is up ₹1.41 Trillion to ₹1.65 Trillion. At the same time, the issue department investment in foreign assets has gone up from ₹32.07 Trillion to ₹33.13 Trillion in FY24.

FY24 has been a rather fulfilling year for the RBI, with its top line and bottom line growing compared to FY23. The same is true of the balance sheet also. It is, therefore, not surprising that the RBI has transferred a record ₹2.11 Trillion as surplus to the government of India.

• CentralBank
• Currency
• MonetaryPolicy
• RBI
• RBIDIvidend
• RBISurplus
• ReserveBankofIndia