RBI released its Weekly Statistical Supplement for week ended 25 Nov 2016. It has RBI balance sheet and Reserve Money data for week ended 18 Nov 2016 and Money Supply data for 11 Nov 2016.
What are the initial trends?
In the RBI Balance Sheet, we see a marginal rise of Rs 8539 Crore. The major changes are mainly on items in Liabilities side and marginal ones in Assets (as expected):
|Reserve Bank of India (in Rs Billion)||2016||Variation|
|Nov. 11||Nov. 18||Week|
|1 Notes Issued||17644.68||14037.47||–3,607.21|
|1.1 Notes in Circulation||17644.51||14037.13||–3,607.37|
|1.2 Notes held in Banking Department||0.17||0.34||0.16|
|2.1 Central Government||1.01||1.01||–|
|2.2 Market Stabilisation Scheme||–||–||–|
|2.3 State Governments||0.42||0.42||–|
|2.4 Scheduled Commercial Banks||4130.3||4052.12||–78.18|
|2.5 Scheduled State Co-operative Banks||35.85||35.71||–0.14|
|2.6 Other Banks||244.57||245.66||1.09|
|3 Other Liabilities||9254.94||9474.18||219.24|
|1 Foreign Currency Assets||23193.02||23462.06||269.04|
|2 Gold Coin and Bullion||1367.94||1367.94||–|
|3 Rupee Securities (including Treasury Bills)||7563.14||7563.83||0.69|
|4 Loans and Advances|
|4.1 Central Government||–||–||–|
|4.2 State Governments||21.44||31.09||9.65|
|4.4 Scheduled Commercial Banks||477.3||314.03||–163.27|
|4.5 Scheduled State Co-op.Banks||–||–||–|
|4.6 Industrial Development Bank of India||–||–||–|
|4.7 Export- Import Bank of India||–||–||–|
|5 Bills Purchased and Discounted|
|7 Other Assets||109.64||94.35||–15.29|
- We see Notes declining by Rs 3.06 lakh crore. This is on expected lines
- The CRR deposits of banks decline by declines which is a puzzle. As Demand and Time deposits have surged in banking, this should have risen as well.
- This decline in Notes will have to be adjusted in other liabilities.
- We see most of this adjustment happening in Deposits – Others (+ 3.55 lakh crore) and in Other Liabilities +0.21 lakh crore).
- The next question is why Deposits-Others? We thought this rise will come in Other Liabilities (where there are capital and reserves).
- For this, we need to see break up of Deposits-others which is not available in WSS. Thus, We picked up data from RBI Annual Report:
2014-15 2015-16 (c) Deposits- Others 1238.57 769.82 (i) Administrators of RBI Employee PF A/c 40.75 43.8 (ii) Depositor Education and Awareness (DEA) Fund 78.75 105.85 (iii) Balances of Foreign Central Banks 14.71 15.21 (iv) Balances of Indian Financial Institutions 4.33 11.43 (v) Balances of International Financial Institutions 1.45 3.2 (vi) Mutual Fund 0.01 0.01 (vii) Others 1,098.57 590.32
- From 2014 onwards, Reverse Repo transactions done by RBI is also included in this Deposits- Others Category. As per data, we know that on 18 Nov 2016 this amount was Rs. 1.02 lakh crore. These have risen as banks have surplus liquidity.
- What accounts for the remaining almost 2.5 lakh crore? My best bet is that most of this is included in Depositor Education and Awareness (DEA) Fund. This fund was created by RBI in the year 2013- 14 for promotion of depositors’ interest and for such other related purposes.
- So, much of the decline in Notes Liabilities is adjusted by Reverse Repo transactions and most likely DEA Fund. There is a marginal rise in Other Liabilities.
- I think with this initial data, we can suggest that there are little chances that Government will take the cancelled liabilities as profits. Unless, things change in future of course.
- There is a rise on Forex Assets by Rs 26904 Crore
- There is a decline in Loans and Advances by Rs 16327 Crore. This is mainly due to decline in Repo and MSF Transactions by RBI.
Overall, decline in Notes is most likely adjusted in the DEA Fund. This could be the trend in future as well..