Liabilities of Reserve Bank
1. Notes Issued: The currency notes issued by the Reserve Bank are the Reserve Bank’s liability and this constitutes the liabilities of the Issue Department. Total notes issued are the sum of Notes in circulation and Notes held in Banking Department of the Bank.
1.1 Notes in Circulation: The notes in circulation comprises the notes issued by Government of India up to 1935 and by the RBI since then, less notes held in the Banking Department,i.e. notes held outside Reserve Bank by the public, banks treasuries etc. The Government of India one rupee notes issued since July 1940 are treated as rupee coins and hence are not included under this head.
1.2 Notes held in the Banking Department: Notes held in the Banking Department represents the amount of notes held in the Banking Department of the Bank at different centre’s to meet the day to day requirements of that Department. Notes in circulation and Notes held in the Banking Department both items are liabilities of Issue Department.
2. Deposits: These represent the cash balances maintained with the Reserve Bank by the Central and State Governments, banks, all India financial institutions, such as, Export Import Bank (EXIM Bank) and NABARD, foreign central banks, international financial institutions, and the balance in different accounts relating to the Employees’ Provident Fund, Gratuity and Superannuation Funds.
2.1 Deposits of the Central Government: The Reserve Bank acts as banker to the Central Government in terms of sections 20 and 21 and as banker to the State Governments by mutual agreement in terms of section 21(A) of the RBI Act. Accordingly, the Central and the State Governments maintain deposits with the Reserve Bank. It has been agreed by the Central Government, to maintain a minimum balance of ` 10 crore daily and ` 100 crore as on Fridays. Whenever, the actual cash balance goes down below the minimum level, the replenishment is made by creation of WMA and overdraft.
2.2 Market Stabilisation Scheme: The Market Stabilisation Scheme (MSS) was introduced in April 2004 following the Memorandum of Understanding between the Government and the Reserve Bank, whereby, the Government issues securities specifically for the purpose of sterilisation operations. The issuances of Government paper under the MSS are undertaken to absorb rupee liquidity created by capital flows of an enduring nature. In order to neutralize the monetary and budgetary impact of this particular instrument, the proceeds under the MSS were parked in a separate deposit account maintained by the Government with the Reserve Bank which was used only for the purpose of redemption and/or buyback of paper issued under the MSS.
2.3 Deposits of State Governments: State Governments maintain accounts with the Reserve Bank to carry out business transactions. State Governments need to maintain minimum `40 crore balances on every Friday. The sum of these amounts is reflected as a liability of RBI under this head. Whenever the actual balance goes down below the minimum specified level, replenishment is made by creation of ways and means advances.
2.4 Deposits of Scheduled Commercial Banks: Scheduled Commercial Banks maintain balances with the Reserve Bank to meet the Cash Reserve Ratio (CRR) requirements and as working funds to meet payment and settlement obligations. These accounts are used to operate the remittance facility scheme, grant of financial accommodation, handling of government business, etc. Deposits in this account do not carry any interest.
2.5 Deposit of Scheduled State Co-operative Banks: Scheduled State Co-operative Banksmaintain certain balances with the RBI and sum of these balances is reflected in this head.
2.6 Deposits of Other Banks’: Deposits of Other Banksinclude the outstanding balances in the deposit accounts of Regional Rural Banks (RRBs), Other Scheduled Co-operative Bank, Non-Scheduled Commercial Banks, Other Cooperative Banks and Other Banks (including Central Co-operative Banks and primary co-operative banks that have been permitted to open accounts with the Reserve Bank.
2.7 Other Deposits: Other deposits include deposits of foreign central banks, domestic and international financial institutions, deposits placed by mutual funds, accumulated retirement benefits and miscellaneous deposits viz., balances of Clearing Corporation of India Ltd, primary dealers, employee credit societies, etc. and sundry deposits. Deposits of the Reserve Bank of India Employees’ Provident, Gratuity, Super-annotation and Guarantee Funds, are also part of other deposits. As per change in accounting practice with effect from July 11, 2014, transaction under Reverse repo is now treated as part of “Other Deposit.”
3. Other Liabilities: Other liabilities of the Reserve Bank’ include internal reserves and provisions of the Reserve Bank such as Currency and Gold Revaluation Account (CGRA), Exchange Equalisation Account (EEA), Contingency Reserve and Asset Development Reserve. Contingency Reserve represents the amount set aside on a year-to-year basis for meeting unexpected and unforeseen contingencies including depreciation in value of securities, exchange guarantees and risks arising out of monetary/exchange rate policy compulsions. These liabilities are also called non-monetary liabilities of the Reserve Bank.
Currency and Gold Revaluation Account (CGRA): Currency and Gold Revaluation Account (CGRA) is one of the important accounts wherein unrealised gains/losses on valuation of Foreign Currency Assets (FCA) and gold due to movements in the exchange rates and/or price of gold are not taken to the Profit & Loss Account but instead booked under this head. As CGRA balances mirror the changes in prices of gold and in exchange rate, its balance varies with the size of asset base and volatility in the exchange rate and price of gold. In the recent past, even though FCA and gold have declined as a percentage of total assets, the CGRA has risen due to sharp depreciation of Indian Rupee against US Dollar.
Investment Revaluation Account (IRA): The Reserve Bank values foreign dated securities at market prices prevailing on the last business day of each month and the appreciation/ depreciation arising there from is transferred to the IRA. The unrealised gains/losses arising from such periodic revaluation are adjusted against the balance in IRA.
Paid-up Capital and Reserve Fund: The Capital of the Bank, of ` 0.05 billion, is held by the Government of India and reserve funds i.e. Credit (Long-term Operations) Fund, National Agricultural Credit (Stabilisation) Fund, National Industrial Credit (Long-term Operations) Fund of the Bank are part of other liability.
Assets of Reserve Bank
1. Foreign Currency Assets: India’s Foreign Exchange Reserves comprise Foreign Currency Assets, Gold, SDR’s and Reserve Bank position with International Monetary Fund (IMF). Foreign currency assets include investments in US Treasury bonds, Bonds/Treasury Bills of other selected Governments, deposits with foreign central banks, foreign commercial banksetc. Foreign currency assets in WSS are sums the foreign currency assets of both Issue and Banking Departments. In Issue Department, these foreign assets back the issuance of notes along with rupee securities and gold. In Banking Department, it includes foreign currency assets and balances with foreign entities like Bank for International Settlements (BIS), foreign commercial banks etc.
2. Gold Coin Bullion: Gold coin bullion represents the gold coin bullion of Issue Department and Banking Department. The gold reserves of Issue Department and Banking Department are valued at value close to international market prices on monthly basis. The current total quantity of gold held is 557.75 tons.
3. Rupee Securities: Rupee securities (including treasury bills) includes the government securities held by Issue and Banking departments. In Issue Department rupee securities along with rupee securities include government securities of that ‘foreign country maturing within ten years of Issue Department plus investment in government securities of Banking Department.
4. Loans and Advances: The Reserve Bank gives loans and advances to the Central & State Governments, commercial and co-operative banks and others in terms of Section 17 and 18 of the Reserve Bank of India Act, 1934.
4.1 Central Government: Reserve Bank provides loans and advances to the Central Government to meet the temporary gap between receipts and payments. These advances are termed as ways and means advances which are fixed from time to time in consultation with the Government.
4.2 State Governments: Loans and advances to the State Governments comprise ways and means advances granted under Section 17(5) of the Reserve Bank of India Act, 1934. The minimum balances to be maintained by the State Governments with the Bank and this is revised from time to time.
4.3 Loans and Advances to NABARD: The Reserve Bank can extend loans to NABARD under section 17 (4E) of the RBI Act. Currently no loans and advances are given to NABARD.
4.4 Loans and Advances to SCBs, State Co-operative Banks: Loans and advances to Scheduled Commercial Banks, State Co-operative Banks made by the Reserve Bank under Sections 17 & 18 of the Reserve Bank of India Act, 1934. The loans and advances to SCBs represent refinance facility made available to banks mainly on account of increase in export credit refinance. At present, ECR refinance limit is set at 50 per cent of eligible export credit outstanding. ECR is provided at the Repo rate. As per change in accounting practice with effect from July 11, 2014, transaction under Repo/Term Repo/MSF with banks is now treated as loans and advances to Banks. Earlier this amount was treated as investment in Government securities.
4.8 Loans and Advances to Others: Loans and advances to others include loans and advances made to various funds created under Section 46 of the Reserve Bank of India Act, 1934. This mainly includes the loans given under special refinance schemes to EXIM Bank and collateralised loans to primary dealers.
5. Bill Purchases and Discounted
5.1 Commercial: The Reserve Bank of India (RBI) Act permits holding internal bills of exchange and commercial papers eligible for purchase under various sub sections of Sections 17 and 18 as a cover for notes issued, they are not held in the books of the Reserve Bank, at present.
5.2 Treasury bills purchased and discounted of Government represent the Government of India Treasury Bills rediscounted by the Bank which is kept in the Banking Department.
6. Investment: This item mainly represents investment of RBI in Non-Government securities. The major items under this head are investment in DICGC share capital, Bharatiya Reserve Bank Note Mudran share capital, NABARD share capital, National Housing Bank share capital etc.
7. Others Assets: Other assets includes RBI’s fixed assets like various Premises, furniture, fittings, etc. at different centres, income accrued but not received, Rupee Coins which are claims on the Issue Department, small coin which are claims on the Government, Balances under various heads of expenditure such as charges account, agencies charges account etc.