What does the RBI’s MRI say? | Business Line
What does the RBI’s MRI say? | Business Line
My VIEW:
My VIEW:
Long back, RBI had taken a conscious
decision to augment its reserves (Contingency Reserves + Assets Development
Reserves) to a level of 12 per cent of the Bank’s balance sheet total. The Bank
almost managed to almost touch this level in 2009, when CR+ADR as percentage to
total assets was11.9.
decision to augment its reserves (Contingency Reserves + Assets Development
Reserves) to a level of 12 per cent of the Bank’s balance sheet total. The Bank
almost managed to almost touch this level in 2009, when CR+ADR as percentage to
total assets was11.9.
Obviously, the practice of
transferring the entire ‘surplus income’ to government when the reserves
position of the central bank shows a continuous declining trend(as a percentage
of total assets) in the context of the present growth rate of Bank’s asset size,
needs a review. Considering the size of RBI’s balance sheet, and remembering
that the Bank’s share capital(5 crore) has not been augmented since inception,
the reserves position needs to be raised to healthier levels. It is in this
context and in view of the internal and external pressures on its income
generating capabilities in recent times, as also the nature of shocks RBI has
to absorb from time to time, GOI should support the central bank to augment its
reserves at least to the level of 12 per cent of total assets which was
accepted by the Bank decades ago.
transferring the entire ‘surplus income’ to government when the reserves
position of the central bank shows a continuous declining trend(as a percentage
of total assets) in the context of the present growth rate of Bank’s asset size,
needs a review. Considering the size of RBI’s balance sheet, and remembering
that the Bank’s share capital(5 crore) has not been augmented since inception,
the reserves position needs to be raised to healthier levels. It is in this
context and in view of the internal and external pressures on its income
generating capabilities in recent times, as also the nature of shocks RBI has
to absorb from time to time, GOI should support the central bank to augment its
reserves at least to the level of 12 per cent of total assets which was
accepted by the Bank decades ago.
To ensure that temptations of
government emanating from external compulsions do not dilute the strength of
RBI’s balance sheet, GOI should take measures to augment the share capital of
RBI after carrying out appropriate amendments to RBI Act. Till such time RBI
should be allowed to retain surplus income by transfer to reserves. Considering
the size of its balance sheet and the internal and external pressures on its
income generating capabilities, as also the nature of shocks the Bank has to
absorb from time to time, the central bank’s reserves need to be augmented on
an ongoing basis.
government emanating from external compulsions do not dilute the strength of
RBI’s balance sheet, GOI should take measures to augment the share capital of
RBI after carrying out appropriate amendments to RBI Act. Till such time RBI
should be allowed to retain surplus income by transfer to reserves. Considering
the size of its balance sheet and the internal and external pressures on its
income generating capabilities, as also the nature of shocks the Bank has to
absorb from time to time, the central bank’s reserves need to be augmented on
an ongoing basis.
M G Warrier
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