The net impact of RBI transfer on balance sheet is about Rs 89159 cr

The RBI gave record transfer of Rs 1.76 lakh crore to the government. The Rs 1.76 lakh crore in turn comprised Rs 1.23 lakh cr annual dividend and Rs 53,000 cr on account of excess transfers. See my article for more details.

RBI announced this transfer on 26 Aug 2019. RBI releases the weekly balance sheet which gives ideas on how the transfer actually took place. If we see the balance sheet changes from 23 Aug 2019 to 30 Aug 2019, we get some ideas.

In Rs crore
23-Aug-19 30-Aug-19 Change Reasons
1 Notes Issued 2162511 2150393 -12118 Currency declines?
1.1 Notes in Circulation 2162500 2150382 -12118
1.2 Notes held in Banking Department 11 11 0
2 Deposits 729835 838249 108414
2.1 Central Government 101 101 0
2.2 Market Stabilisation Scheme
2.3 State Governments 42 42 0
2.4 Scheduled Commercial Banks 519663 538143 18480 Rise in CRR balances
2.5 Scheduled State Co-operative Banks 4075 4190 115
2.6 Other Banks 33122 33461 339
2.7 Others 178072 262413 84341 Risen because of increase in reverse repo by 20,355 cr. Not sure about remaining 64,000 cr. Could be rise in surplus balances with PDS, mutual funds etc
3 Other Liabilities 1284557 1104241 -180316 Comprises Transfer of Rs 1.76 lakh crore.
Total Liabilities /Assets 4182143 4092984 -89159 Net impact of transfer
1 Foreign Currency Assets 2873575 2854233 -19342 Forex declines to pay the transfer
2 Gold Coin and Bullion 192762 196879 4117
3 Rupee Securities (including Treasury Bills) 998915 998945 30
4 Loans and Advances 83124 -83124
4.1 Central Government 45010 0 -45010 The government borrowings from RBI mainly Repo transactions are netted to zero
4.2 State Governments 303 606 303
4.4 Scheduled Commercial Banks 31195 31140 -55
4.5 Scheduled State Co-op.Banks
4.6 Industrial Development Bank of India
4.7 Export-Import Bank of India
4.8 Others 6616 5633 -983
4.9 Financial Institution Outside India
5 Bills Purchased and Discounted
5.1 Commercial
5.2 Treasury
6 Investments 1964 1964 0
7 Other Assets 31803 3584 -28219 Declined on account of interim dividend

Couple of points:

  • The actual decline on balance sheet is just about Rs 89,000 cr and not Rs 1.76 lakh crore
  • In liability side:
    • The Rs 1.76 lakh crore is reflected in Other Liabilities which includes both annual transfer and decline of the contingency reserve.
    • However, we see some liability items rise to negate the effect of sharp decline in other liabilities. This is mainly deposits of banks and ‘others’ rise by about Rs 84,000 cr.
    • The deposits of banks have risen perhaps on account of CRR balances as deposits would have risen due to transfer.
    • The Others category has risen because of increase in reverse repo by 20,355 cr. Not sure about remaining 64,000 cr. Could be rise in surplus balances with PDS, mutual funds etc perhaps due to surplus liquidity conditions (not sure).
  • We see how the netting has happened on asset side.
    • Loans and advances to central government which comprises Repo, are netted to zero. Repo has become zero due to rise in liquidity.
    • Other assets declined on account of interim dividend of Rs 28,000 cr
    • Forex assets declines by Rs 19000 cr which indicates some sell-off to pay for the transfer.
    • There is no change in RBI holding of G-secs and have actually increased by Rs 30 cr in the week!

RBI balance sheet is hardly easy with many simultaneous changes. Even if RBI has given Rs 1.48 lakh crore (excluding interim dividend), the net impact is not that much as liquidity flows in the system have changed.

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