RBI doubles contingency reserve,surplus transfer to Centre falls

This has come even though RBI has not used any amount from the fund over the last five years.

Written by Sandeep Singh | Mumbai | Published: August 29, 2012 12:44:23 am

The Contingency Reserve (CR) of the Reserve Bank of India (RBI) maintained to provide for contingencies has more than doubled over the last five years from Rs 93,770 crore in June 2007 to Rs 1,95,405 crore in June 2012.

However,it still falls short of the indicative target of 12 per cent of the central bank’s total assets that should be made up by the sum of the two reserves: CR and the Asset Development Reserve (ADR).

As per the RBI’s Annual Report 2011-12,the central bank allotted 46.4 per cent of its total income to the CR which is the highest proportion of total income transferred in the last four years.

This has come even though RBI has not used any amount from the fund over the last five years.

“The balance under CR is maintained to meet any unforeseen contingency or diminution in the value of RBI’s assets. We are not guided by its utilisation or otherwise,” said RBI in an e-mailed response.

Even after the aggressive routing of funds into the CR,the ratio of the CR+ADR to its total assets stood at 9.7 per cent at the end of June 2012.

“As the balance sheet itself has increased in size by more than 22 per cent compared with last year,notwithstanding a higher transfer this year,the percentage of CR+ADR to total assets came down from 10.3 per cent last year to 9.7 per cent this year,” the RBI said.

While the RBI’s allocation to the CR has been on a rise and is aiming to meet the indicative target,its contribution as Transfer of Surplus to the government stood at only 30 per cent of the total income and is the lowest proportion of total income transferred to the government in the last four years.

In absolute terms however,RBI’s surplus transfer to the government rose by Rs 1,001 crore from Rs 15,009 crore in 2010-11 to Rs 16,010 crore in 2011-12.

Incidently,while the government has been looking at various means to raise funds in order to keep its budget deficit under control,the RBI may not come to its rescue as it has to meet its own targets of CR + ADR.

The Reserve Bank of India witnessed its total income grow by 43.4 per cent in 2011-12 from Rs 37,070 crore to Rs 53,176 crore.

“In terms of Section 47 of the RBI Act,1934,after making provisions for contingencies and statutory transfers,the balance profit of RBI is transferred to the Central government,” the RBI said.

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