RBI’s First Balance Sheet as on 31 Dec 1935…

Given the interest in RBI Balance sheet recently, it is interesting to see RBI’s First Annual Report/balance sheet. The first balance sheet was for a 9 month period (1-April-1935 to 31-Dec-1935).

The RBI took over the currency function from Paper Currency Department of Government and management of Public Debt and government account from Imperial Bank. Further:

It was, however, not till the 4th of July 1935 that the Bank assumed one of its most important function as a Central Bank by announcing the first official Bank Rate of the country. The next step was to establish contact officially with the scheduled banks. This was accomplished on the 5th of July 1935, the date on which the scheduled banks lodged their statutory deposits with the Bank in accordance with the provisions of Section 42 of the Reserve Bank of India Act.

We take all this for granted now!

RBI was a shareholder bank. Of the Rs 5 crore subscribed capital (which remains until today), Rs 2.2 lakh was held by the Government. The process of share subscription required lot of planning given the restrictions over who could be shareholders:

With a view to giving all interested an opportunity to apply, arrangements for receiving applications were made at 574 different stations spread throughout the country. During  the three days-22nd to 25th March 1935-fixed for the purpose, 1,34,558 applications were received. While the number of applications in the Calcutta (Eastern) and Rangoon (Burma) areas feIl short of the statutory quota allotted to these two areas, they were considerably in excess in the Bombay (Western), Delhi (Northern) and Madras (Southern) areas, and the issue as a whole was over subscribed to the extent of nearIy 5 crores.

This involved a drawing for the purpose of allotment of shares as stipulated in Section 4(6) of the Act. In order to avoid inconvenience to, and dislocation of, the money market consequent on withdrawal of large funds from the market, extensive and systematic arrangements were necessary to ensure accuracy and expedition in the scrutiny and checking of applications and at subsequent stages, viz., drawing of lots and refunding the money without undue delay to unsuccessful applicants. The whole process was completed with utmost dispatch and without hitch, within 10 days-an achievement which reflects credit on the Officer-in-charge of the Share Issue Department. Our thanks are also due to the Imperial Bank of India and the authorities of the Postal and Treasury Departments for their co-operation and expeditious handling of applications from near and distant parts of the country. 

Given this brief, let’s see the financials.

The RBI’s income and expenditure statement showed a profit of Rs. 56 lakh of which Rs 13 lakh was given to shareholders and Rs 43 lakh to Governor General/Government.

Income(In Rs crore) 1.26
   Interest received 1.26
Expenditure 0.70
   Establishment 0.22
   Agency Charges 0.17
Surplus 0.56
   Payment of dividend at rate of 3.5% p.a. 0.13
   Transfer to Reserve Fund
   Additional Dividend
   Surplus payabale to Governor General 0.43

here is how the first balance sheet looks:

RBI Balance Sheet as on 31 Dec 1935 (in Rs crore)
Issue Department
Explanations Liabilities Assets Explanations
Notes Issued Gold Coin and Bullion 110.6
Includes notes held by public and banks Notes in Circulation 171.8 Held in India 41.6 consists of bar gold and coin held at the Government Mints and at the branches of the Issue Department.
Notes held by RBI’s Banking Department Notes held in Banking Department 21.5 Held Outside India 2.9 consists of bar gold and
sovereigns held by the Banlr of England an our behalf
193.3 Sterling Securities 66.2 consist of Government
securities of the United Kingdom maturing within five
years.
Rupee Coin 57.1
GOI Securities 25.5
Internal Bills of Exchange and other commercial paper
193.3 193.3
Banking Department
Capital 5.0 Notes 21.5 Cash resources of the bank
Provided by Govt in form of Rupee Securities Reserve Fund 5.0 Rupee Coin 0.0
Deposits Subsidiary Coin 0.0
Govt account transferred from Imperial Bank to RBI Government 6.0 Bills Discounted
Banks 28.3 Internal
Others 0.3 External
Bills drawn by RBI offices Bills Payable 0.1 GOI T-Bills
various amounts held in suspense, principally transactions in transit between Branches and the profits for distribution to shareholders and Government. Other Liabilities 0.7 Balances held abroad 17.4 includes Cash and Short Term Securities held on the Bank’s account by the Bank of England. For the purpose of converting the value of sterling assets into rupees, the rate of exchange has been taken as one shilling and six pence to the rupee
Loans and Advances to GoI 1.0 Ways and Means advances
Other Loans and Advances
Investments 5.3 Government of India
Rupee Securities, and include those delivered to the Bank in respect of the Reserve Fund.
Other Assets 0.2 furniture, fittings and stationery, as well as certain items in course of collection.
45.5 45.5
Total Amount 238.7 238.7

Much of the balance sheet items remain the same. The main change has been rise in share of government and foreign securities and decline in share of gold.

The RBI Balance sheet has increased from Rs 238.7 crore in 1935 to Rs 41 lakh crore in 2019!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.


%d bloggers like this: