RBI Balance Sheet 2020-21: Higher Income and Lower Expenditure leads to high transfers to the government

RBI released its annual report for the year 2020-21. Earlier RBI had informed that it is paying government a dividend of Rs 99122 cr leading to discussions on what led to the second highest dividend.

The annual report sums up the reasons:

The year 2020-21 is significant for the change in the accounting year of the Reserve Bank to April – March (earlier July – June). Due to this transition, the accounting year 2020-21 was of nine months only, i.e., July 2020 – March 2021. Thus, data presented in the chapter are for a period of nine months for 2020-21 as compared to twelve months for the previous year(s).

The Balance Sheet size of the Reserve Bank, nevertheless, increased by 6.99 per cent for the year ended March 31, 2021, mainly reflecting its liquidity and foreign exchange operations. While income for the year decreased by 10.96 per cent, the expenditure decreased by 63.10 per cent. The year ended with an overall surplus of `99,122 crore as against `57,127.53 crore in the previous year, representing an increase of 73.51 per cent.

Within income, RBI earned most from Exchange gain/ loss from Foreign Exchange transactions which increased from Rs 29,993.22 cr to Rs 50,629.18 cr, an increase of Rs. 20635.96. Last year, the RBI changed using the weighted average cost method for arriving at the cost.

Satyakam Gautam has more insights into the risk management of the RBI’s balance sheet. He says next year will be tricky for RBI as it there will be a constraint on balance sheet expansion given risk buffers.

 

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