X THE RESERVE BANK'S ACCOUNTS FOR 2004-05
10.1 The key financial results of the Reserve Bank’s operations during the year are presented in this Section.
INCOME AND EXPENDITURE
10.2 The gross income, expenditure, appropriations and net disposable income of the Reserve Bank have been evolving over the last five years (Table 10.1).
converted into marketable securities. The transfer on account of interest differential is intended to compensate the Government for the difference in interest expenditure which the Government had to bear consequent on the conversion.
INCOME
10.4 The gross income of the Reserve Bank for the year 2004-05 was Rs.19,028.28 crore, which
Table 10.1: Trends in Gross Income, Expenditure and Net Disposable Income
|
|
|
|
|
|
|
|
(Rupees crore) |
|
|
|
|
|
|
|
|
Item |
2004-05 |
2003-04 |
2002-03 |
2001-02 |
2000-01 |
|
|
|
|
|
|
|
|
1 |
2 |
3 |
4 |
5 |
6 |
|
|
|
|
|
|
|
Total Income (Gross) |
19,028.28 |
14,323.70 |
23,185.64 |
24,690.34 |
21,848.87 |
Less transfer to: |
|
|
|
|
|
|
(i) Contingency Reserve |
6,125.92 |
969.47 |
6,733.92 |
6,996.04 |
6,202.57 |
|
(ii) Asset Development Reserve |
687.09 |
188.09 |
890.31 |
827.91 |
704.78 |
Total (i + ii) |
6,813.01 |
1,157.56 |
7,624.23 |
7,823.95 |
6,907.35 |
Total Income (Net) |
12,215.27 |
13,166.14 |
15,561.41 |
16,866.39 |
14,941.52 |
Total Expenditure |
6,811.27 |
7,762.14 |
6,723.41 |
6,542.39 |
5,587.52 |
Net Disposable Income |
5,404.00 |
5,404.00 |
8,838.00 |
10,324.00 |
9,354.00 |
|
Less : Transfer to Funds * |
4.00 |
4.00 |
4.00 |
4.00 |
4.00 |
|
|
|
|
|
|
|
Surplus transfer to the Government |
5,400.00 |
5,400.00 |
8,834.00 |
10,320.00 |
9,350.00 |
|
|
|
|
|
|
|
* :An amount of Rupees one crore each transferred to the National Industrial Credit (Long Term
Operations) Fund,National Rural Credit (Long Term Operations) Fund, National Rural Credit
(Stabilisation) Fund and National Housing Credit (Long Term Operations) Fund during each of the five years. |
Surplus Transferable to Government of India
10.3 The surplus transferable to the Central Government for
the year 2004-05 amounted to Rs.5,400.00 crore, inclusive of Rs.2,494.00 crore
towards interest differential on special securities was higher by Rs.4,704.58
crore (32.8 per cent) than the previous year’s total income of Rs.14,323.70
crore. There was an increase in income from foreign sources while income from
domestic sources declined during the year (Table 10.2 and Chart X.1).
Table 10.2: Gross Income
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|
|
|
|
|
|
|
|
|
(Rupees crore) |
|
|
|
|
|
|
|
|
|
Item |
|
2004-05 |
2003-04 |
2002-03 |
2001-02 |
2000-01 |
|
|
|
|
|
|
|
|
|
1 |
|
2 |
3 |
4 |
5 |
6 |
|
|
|
|
|
|
|
|
A. |
Foreign Sources |
|
|
|
|
|
|
|
Interest, Discount, |
Exchange |
16,979.47 |
9,103.50 |
9,826.65 |
9,986.46 |
10,086.08 |
B. |
Domestic Sources |
|
|
|
|
|
|
|
Interest |
|
1,607.34 |
4,872.41 |
13,064.77 |
14,492.14 |
11,314.12 |
|
Other Earnings |
|
441.47 |
347.79 |
294.22 |
211.74 |
448.67 |
Total: Domestic |
|
2,048.81 |
5,220.20 |
13,358.99 |
14,703.88 |
11,762.79 |
C. |
Total Income (Gross) (A+B) |
19,028.28 |
14,323.70 |
23,185.64 |
24,690.34 |
21,848.87 |
Table 10.3: Contingency and Asset
Development Reserves and Surplus Transfer to the Government
|
|
|
|
|
(Rupees crore) |
Item |
2004-05 |
2003-04 |
2002-03 |
2001-02 |
2000-01 |
1 |
2 |
3 |
4 |
5 |
6 |
Total Income (Gross) |
19,028.28 |
14,323.70 |
23,185.64 |
24,690.34 |
21,848.87 |
Transfer to Contingency Reserve |
6,125.92 |
969.47 |
6,733.92 |
6,996.04 |
6,202.57 |
|
(32.2) |
(6.8) |
(29.0) |
(28.3) |
(28.4) |
Asset Development Reserve |
687.09 |
188.09 |
890.31 |
827.91 |
704.78 |
|
(3.6) |
(1.3) |
(3.8) |
(3.4) |
(3.2) |
Surplus transfer to the Government |
5,400.00 |
5,400.00 |
8,834.00 |
10,320.00 |
9,350.00 |
|
(28.4) |
(37.7) |
(38.1) |
(41.8) |
(42.8) |
Note: Figures in parentheses indicate proportion to total income. |
10.5 The share of transfer to Contingency Reserve, Asset Development
Reserve and surplus transferred to Government as a percentage to total income
is given in Table 10.3.
Earnings from Foreign Sources
10.6 The Reserve Bank’s earnings from the deployment of foreign
currency assets and gold increased by Rs.7,875.97 crore (86.5 per cent) from
Rs.9,103.50 crore in 2003-04 to Rs.16,979.47 crore in 2004-05 (Table 10.4).
This was mainly on account of increase in the level of foreign currency assets,
hardening of short term interest rates in the USA and lower mark-to-market depreciation
on securities. Before accounting for mark-to-market depreciation on securities,
the rate of earnings on foreign currency assets and gold was 3.2 per cent in
2004-05 as against 2.8 per cent in 2003-04. The rate of earnings on foreign
currency assets and gold, after accounting for depreciation, increased from
2.1 per cent in 2003-04 to 3.1 per cent in 2004-05.
Table 10.4: Earnings from Foreign
Sources
|
|
|
(Rupees crore) |
Item |
As on |
|
Variation |
|
June 30, 2005 |
June 30, 2004 |
Absolute |
Per cent |
1 |
2 |
3 |
4 |
5 |
Foreign Currency Assets (FCA) |
5,75,863.66 |
5,24,865.01 |
50,998.65 |
9.7 |
Gold |
19,375.10 |
18,655.48 |
719.62 |
3.9 |
Special Drawing Rights (SDR) |
18.35 |
8.42 |
9.93 |
117.9 |
Reserve Position in the IMF ** |
6,791.43 |
5,980.47 |
810.96 |
13.6 |
Total Foreign Exchange Reserves (FER) |
6,02,048.54 |
5,49,509.38 |
52,539.16 |
9.6 |
Average FCA |
5,51,659.54 |
4,38,958.40 |
1,12,701.14 |
25.7 |
Earnings (Interest, Discount, Exchange gain/loss, |
|
|
|
|
Capital gain / loss on Securities) |
17,889.74 |
12,415.99 |
5,473.75 |
44.1 |
Depreciation on Securities |
(-) 910.27 |
(-) 3,312.49 |
2,402.22 |
(-)72.5 |
Earnings Net of Depreciation |
16,979.47 |
9,103.50 |
7,875.97 |
86.5 |
Memo Items: |
|
|
|
|
Unrealised appreciation on Securities |
900.14 |
330.31 |
569.83 |
172.5 |
Earnings as percentage of Average FCA |
3.2 |
2.8 |
|
|
Earnings (net of depreciation) as percentage of Average FCA |
3.1 |
2.1 |
|
|
** : Reserve Position in the International Monetary Fund (IMF), which was shown as a memo item from May 23, 2003 to
March 26, 2004 has been included in the reserves from the week ended April 2, 2004. |
Table 10.5: Earnings from Domestic
Sources
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(Rupees crore) |
|
|
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|
|
Item |
As on |
Variation |
|
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|
|
|
|
|
June 30, 2005 |
June 30, 2004 |
Absolute |
Percentage |
|
|
|
|
|
|
|
1 |
2 |
3 |
4 |
5 |
|
|
|
|
|
|
Domestic Assets |
106,952.94 |
84,872.74 |
22,080.20 |
26 |
Weekly Average of Domestic Assets |
99,977.76 |
88,288.77 |
11,688.99 |
13.2 |
Earnings |
2,048.81 |
5,220.20 |
(-)3,171.39 |
(-) 60.8 |
|
|
(8,143.92) |
(2,744.69) |
|
|
|
of which: |
|
|
|
|
|
Interest |
1,607.34 |
4,872.41 |
(-)3,265.07 |
(-) 67.0 |
|
(i) Profit on Sale of Securities |
4,220.52 |
2,322.62 |
1,897.90 |
81.7 |
|
(ii) Interest on Securities |
(-) 3,272.08 |
1,938.28 |
(-)5,210.36 |
(-)268.8 |
|
(iii) Interest on Loans and Advances |
367.35 |
376.64 |
(-) 9.29 |
(-)2.5 |
|
(iv) Other Interest Receipts |
291.55 |
234.87 |
56.68 |
24.1 |
Other earnings |
441.47 |
347.79 |
93.68 |
26.9 |
(i) |
Discount |
0.01 |
0.01 |
– |
– |
(ii) |
Exchange |
0.04 |
0.07 |
(-)0.03 |
(-)42.9 |
(iii) |
Commission |
381.36 |
335.05 |
46.31 |
13.8 |
(iv) |
Rent realised and others |
60.06 |
12.66 |
47.40 |
374.4 |
Memo Items: |
|
|
|
|
Earnings in percentage terms |
2.0 |
5.9 |
|
|
(on average domestic assets) |
|
|
|
|
Earnings in percentage terms |
|
|
|
|
(excluding profit on sale of Securities) |
(-) 2.2 |
3.3 |
|
|
|
|
|
|
|
|
Note : Figures in parentheses are depreciation on securities. |
Income from Domestic Sources
10.7 Domestic income decreased by Rs.3,171.39 crore (60.8 per
cent) from Rs.5,220.20 crore in 2003-04 to Rs.2,048.81 crore in 2004-05. The
decline in income was mainly on account of (a) booking of substantially higher
depreciation in the value of rupee securities as the yields hardened during
the year, (b) lower availment of WMA by Central Government and State Governments,
(c) investment of Government of India surplus balances in rupee securities from
Bank’s por tfolio and (d) earmarking of cer tain securities to cover the liabilities
in Provident Fund, Superannuation Fund and Encashment of Ordinary Leave Fund.
The net interest income on rupee securities was negative on account of higher
depreciation during the year (Table 10.5).
10.8 Profits booked on sale of securities amounted to Rs.4,220.52
crore in 2004-05, representing an increase of Rs.1,897.90 crore over the previous
year. The interest income on ways and means advances declined by Rs.196.42 crore
from Rs.370.52 crore in 2003-04 to Rs.174.10 crore in 2004-05, reflecting decreased
recourse to this facility by the Central Government and State Governments during
2004-05.
EXPENDITURE
10.9 Total expenditure of the Reser ve Bank declined by Rs.950.87
crore (12.3 per cent) from Rs.7,762.14 crore in 2003-04 to Rs.6,811.27 crore
in 2004-05 (Table 10.6 and Chart X.2).
Interest Payment
10.10 Interest payment decreased by Rs.422.20 crore (23.3 per
cent) from Rs.1,808.48 crore in 2003-04 to Rs.1,386.28 crore in 2004-05. During
the year, the Bank earmarked certain Government securities from its Investment
Account in order to cover the liabilities in Provident Fund, Superannuation
Fund and Encashment of Ordinary Leave Fund. Consequently, interest payments
on these funds (Rs.403.8 crore) have been made from the interest earned on these
earmarked securities and hence do not form part of interest payments.
Establishment Expenditure
10.11 Establishment expenditure declined by Rs.579.82 crore
(26 per cent) from Rs.2,232.99 crore in 2003-04 to Rs.1,653.17 crore in 2004-05
as a result
Table 10.6: Expenditure
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|
(Rupees crore) |
Item |
2004-05 |
2003-04 |
2002-03 |
2001-02 |
2000-01 |
|
|
|
|
|
|
|
1 |
|
2 |
3 |
4 |
5 |
6 |
I. |
Interest Payment |
1,386.28 |
1,808.48 |
1,990.09 |
2,334.99 |
1,994.80 |
|
of which: |
|
|
|
|
|
|
Scheduled Banks |
1,276.83 |
1,323.23 |
1,483.02 |
1,838.57 |
1,660.83 |
II. |
Establishment |
1,653.17 |
2,232.99 |
1,488.86 |
1,304.36 |
870.85 |
III |
Non-Establishment |
3,771.82 |
3,720.67 |
3,244.46 |
2,903.04 |
2,721.87 |
|
of which: |
|
|
|
|
|
|
a) Agency charges |
1,824.17 |
1,539.12 |
1,352.41 |
1,207.84 |
1,160.70 |
|
b) Security printing |
1,443.57 |
1,709.56 |
1,433.09 |
1,304.49 |
1,122.78 |
Total [I+II+III] |
6,811.27 |
7,762.14 |
6,723.41 |
6,542.39 |
5,587.52 |
of lower provisioning required in respect of gratuity and superannuation
funds. As per the actuarial valuation, the appropriation to the Gratuity and
Superannuation Fund was to the extent of Rs.228.06 crore as against Rs.1,010.00
crore during the previous year. The establishment expenditure during 2004-05
comprised of salary (17.3 per cent), allowances (15.5 per cent), funds (46.8
per cent) and miscellaneous expenditures (20.4 per cent).
Non-Establishment Expenditure
10.12 Expenditure on security printing comprising, inter
alia, cost of printing currency notes and cheque forms decreased by Rs.265.99
crore (15.6 per cent) from Rs.1,709.56 crore in 2003-04 to Rs.1,443.57 crore
in 2004-05 mainly due to reduction in the cost of printing banknotes and lower
supply of notes by
172.3 crore pieces. The expenditure incurred for security printing
includes a sum of Rs.209.24 crore paid for banknotes supplied during the previous
years.
BALANCE SHEET
LIABILITIES
National Industrial Credit (Long Term Operations) Fund
10.13 There were no operations in the National Industrial Credit
(Long Term Operations) Fund (established under Section 46 C of the Reserve Bank
of India Act, 1934) during 2004-05 except the credit of Rs.1.00 crore to the
Fund out of the Reserve Bank’s income.
National Housing Credit (Long Term Operations) Fund
10.14 The National Housing Credit (Long Term Operations) Fund
was established by the Reserve Bank in terms of Section 46 D(1) of the Reserve
Bank of India Act, 1934 in Januar y 1989. A token contribution of Rs.1.00 crore
was made to the Fund out of the Reserve Bank’s income during 2004-05.
Deposits - Banks
10.15 ‘Deposits - Banks’ represent balances maintained by banks
in current account with the Reserve Bank mainly for maintaining Cash Reserve
Ratio (CRR) and as working funds for clearing adjustments.
Deposits - Others
10.16 ‘Deposits - Others’ include deposits from financial institutions,
employees’ provident fund deposits, surplus earmarked pending transfer to the
Government and sundry deposits.
Other Liabilities
10.17 ‘Other Liabilities’ include the internal reserves and
provisions of the Reserve Bank and net credit balance in the RBI General Account.
These liabilities have declined by Rs.29,573.22 crore (22.8 per cent ) from
Rs.1,29,929.49 crore as on June 30, 2004 to Rs.1,00,356.27 crore as on June
30, 2005 mainly on account of decrease in the levels of Currency and Gold Revaluation
Account (CGRA).
10.18 The reserves, viz. Contingency Reserve, Asset Development
Reserve, Currency and Gold Revaluation Account and Exchange Equalisation Account
reflected in ‘Other Liabilities’ are in addition to the ‘Reserve Fund’ of Rs.6,500.00
crore held by the Reserve Bank as a distinct balance sheet head.
Currency and Gold Revaluation Account (CGRA) and Exchange Equalisation Account
(EEA)
10.19 Gains/losses on valuation of foreign currency assets
and gold due to movements in the exchange rates and/or prices of gold are not
taken to Profit and Loss Account but instead booked under a balance sheet head
named as CGRA. The balance represents accumulated net gain on valuation of foreign
currency assets and gold. During 2004-05, there was a depletion of Rs.35,376.83
crore in CGRA, thus decreasing its balance from Rs.62,283.04 crore as on June
30, 2004 to Rs.26,906.21 crore as on June 30, 2005. The balance in CGRA at the
end of June 2005 was equivalent to 4.5 per cent of foreign currency assets and
gold holdings of the Reserve Bank as compared with 11.5 per cent at the end
of June 2004. The decline was mainly on account of increase in the level of
foreign currency assets during 2004-05, on the one hand and appreciation of
the rupee against the US dollar and US dollar against other currencies, on the
other. The balance in EEA represents provision made for exchange losses
Table 10.7: Balances in Currency and Gold Revaluation Account and Exchange
Equalisation Account
|
|
(Rupees crore) |
|
|
|
As on |
Currency and |
Exchange |
June 30 |
Gold Revaluation |
Equalisation |
|
Account |
Account |
|
|
|
1 |
2 |
3 |
2001 |
29,124.44 |
49.46 |
2002 |
51,010.77 |
51.50 |
2003 |
51,276.41 |
567.25 |
2004 |
62,283.04 |
5.65 |
2005 |
26,906.21 |
0.50 |
arising out of forward commitments. The balance in the EEA as on June 30, 2005 stood at Rs.0.50 crore. The balances in CGRA and EEA are grouped under ‘Other Liabilities’ in the balance sheet (Table 10.7).
Contingency Reserve and Asset Development Reserve
10.20 The Reserve Bank maintains a Contingency Reserve (CR) to enable it to absorb unexpected and unforeseen contingencies. The balance in CR has increased from Rs.56,218.76 crore as on June 30, 2004 to Rs.62,344.68 crore as on June 30, 2005. A transfer of Rs.6,125.92 crore was made to CR during 2004-05 from the Reserve Bank’s income. The balance in CR is sufficient to meet contingent liabilities.
10.21 In order to meet the inter nal capital expenditure and make investments in its subsidiaries and associate institutions, the Reserve Bank had created a separate Asset Development Reserve (ADR) in 1997-98, with the aim of reaching one per cent of the Reserve Bank’s total assets within the overall indicative target of 12 per cent set for CR. In the year 2004-05, an amount of Rs.687.09 crore was transferred from income to ADR raising its level from Rs.5,778.94 crore as on June 30, 2004 to Rs.6,466.03 crore as on June 30, 2005. CR and ADR together constituted 10.1 per cent of total assets of the Bank as on June 30, 2005 (Table 10.8).
Table 10.8 : Balances in Contingency Reserve and Asset Development Reserve
|
|
|
|
|
|
|
(Rupees crore) |
|
|
|
|
|
As on |
Balance in |
Balance in |
Total |
Percentage |
June 30 |
CR |
ADR |
|
to total |
|
|
|
|
assets |
|
|
|
|
|
1 |
2 |
3 |
4 |
5 |
|
|
|
|
|
2001 |
36,514.13 |
3,872.63 |
40,386.76 |
9.9 |
2002 |
48,434.17 |
4,700.54 |
53,134.71 |
11.7 |
2003 |
55,249.29 |
5,590.85 |
60,840.14 |
11.7 |
2004 |
56,218.76 |
5,778.94 |
61,997.70 |
10.2 |
2005 |
62,344.68 |
6,466.03 |
68,810.71 |
10.1 |
ASSETS
Foreign Currency Assets
10.22 The foreign currency assets comprise foreign securities held in Issue Department, balances held abroad and investments in foreign securities held in Banking Depar tment. Such assets rose from Rs.5,24,865.01 crore as on June 30, 2004 to Rs.5,75,863.66 crore as on June 30, 2005. The
Table 10.9: Outstanding Foreign Currency and Domestic Assets
|
(Rupees crore) |
|
|
|
As on |
Foreign |
Domestic |
June 30 |
Currency |
Assets |
|
Assets |
|
|
|
|
1 |
2 |
3 |
2001 |
1,91,226.06 |
2,16,246.37 |
2002 |
2,67,333.18 |
1,86,226.62 |
2003 |
3,65,000.98 |
1,54,812.91 |
2004 |
5,24,865.01 |
84,872.74 |
2005 |
5,75,863.66 |
1,06,952.94 |
increase in the level of foreign currency assets was mainly
on account of net purchases of US dollars from the market and interest and discount
received, net of revaluation losses (Table 10.9 and Chart X.3).
Investment in Government of India Rupee Securities
10.23 Investment in Government of India rupee securities, which
was Rs.40,179.74 crore as on June 30, 2004 increased by Rs.28,296.74 crore (70.4
per cent) to Rs.68,476.48 crore as on June 30, 2005.
Table 10.10: Investments in Shares of Subsidiaries/Associate Institutions
|
|
|
|
(Rupees crore) |
|
Institution |
Book value of shares held as on |
|
|
|
|
|
|
June |
June |
|
|
30, 2005 |
30, 2004 |
|
1 |
2 |
3 |
|
|
|
|
1. |
Deposit Insurance and Credit |
|
|
|
Guarantee Corporation |
50.00 |
50.00 |
2. |
National Bank for Agriculture |
|
|
|
and Rural Development |
1,450.00 |
1,450.00 |
3. |
State Bank of India |
1,222.73 |
1,222.73 |
4. |
National Housing Bank |
450.00 |
450.00 |
5. |
Bharatiya Reserve Bank Note |
|
|
|
Mudran (Pvt.) Ltd. |
800.00 |
800.00 |
6. |
Infrastructure Development |
|
|
|
Finance Co. Ltd. |
– |
150.00 |
|
Total |
3,972.73 |
4,122.73 |
Investments in Shares of Subsidiaries and Associate Institutions
10.24. The Reserve Bank transferred its shareholding in Infrastructure Development Finance Co. Ltd. to the Central Government in 2004-05. There was no other change in the Reserve Bank’s investments in the shares of its subsidiaries and associate institutions during 2004-05 (Table 10.10).
Other Assets
10.25 ‘Other Assets’ comprise mainly fixed assets, gold holdings in the Banking Department, amounts spent on projects pending completion and staff advances. The level of ‘Other Assets’ has declined by Rs.56.20 crore (0.4 per cent) from Rs.14,459.77 crore as on June 30, 2004 to Rs.14,403.57 crore as on June 30, 2005.
Auditors
10.26 The accounts of the Reserve Bank for the year 2004-05 were audited by M/s. Khimji Kunverji & Co., Mumbai, M/s. J.L. Sengupta & Co., Kolkata, M/s. S.N. Nanda & Co., New Delhi, M/s Rajendra K. Goel & Co., New Delhi, M/s. Ford, Rhodes, Parks & Co., Mumbai and M/s M.K.Dandeker & Co., Chennai appointed by the Central Government.
|