Reserve Bank of India (RBI) Balance Sheet

Covid-19 crisis prompts RBI to increase its share of loans to banks and the government.

Note: Published weekly by the Reserve Bank of India (RBI). Updated to the last week of May 2020. (Published on June 12, 2020)

Recent Trend

The most noticeable change in the Reserve Bank of India’s consolidated balance sheet for April 2020 is in terms of the loans it has given to Indian scheduled banks. The RBI has total assets or a balance size sheet of Rs. 51 trillion and it extended 5.6% of it as loans to banks in April 2020 compared to 0.4% in January 2020. The loans to banks is equivalent to 1.4% of GDP. In the last two months, RBI unveiled two sets of monetary stimulus packages in the context of Covid-19 to facilitate bank credit flows, ensure the availability of adequate liquidity in the system, and ease financial stress.

Looking at the loans to government, RBI has given 2.2% of its total assets as loans to the government in the month of April, 2020. Given the crucial role played by the government in controlling the spread of COVID-19, the RBI has had to extend the limit the government can borrow from it. Now the central government can borrow Rs. 2 trillion from RBI for the first half of 2020-21 which was earlier fixed at Rs 750 billion in the first half of pervious fiscal (2019-20). This has been done in order to help address the government’s immediate financial constraints.

Liquidity in the system through issuing of notes has reached 12.4% of GDP in April, 2020 from earlier 11% of GDP in January. 

RBI’s foreign currency assets has reduced to 65% of its total assets in April compared to 70% in January, 2020 due to an outflow of foreign capital in the Indian financial market. This is indicative of uncertainty prevailing in the Indian economy due to covid-19 pandemic.
What is clear is that the spread of covid-19 and extended lockdown across the nation has prompted the RBI to take various measures and the RBI has also been demonstrating the policy coordination between itself and government.

Brief Overview

RBI Balance Sheet represents the central bank's monetary relationship with the commercial banks and the government. Lately, the RBI balance sheet has rapidly expanded and gone through transformations. Post-demonetisation the banknotes to GDP ratio fell, and it took time to rise up again. Now that three years have passed, banknotes to GDP ratio has risen back to pre-demonetisation level. In mid-2000s the domestic securities held by the RBI accounted for a mere 1% of GDP, while the foreign securities accounted for about 15%. In recent years, the size of domestic securities measured as % of GDP is much bigger, around 5%. This indicates that domestic securities are becoming a better tool for the RBI to control the financial market in India, perhaps as a tool to control the size of liquidity in India. To calculate components as a percentage of GDP,  we have used seasonally adjusted quarterly GDP data.

The RBI publishes the balance sheet on Friday every week. We at IMA take the balance sheet as of last Friday of the month for the monthly analysis. We notice that there is some inconsistency in the balance sheet of few months; hence we have made necessary changes to make the data consistent. For March 2011, we have used the balance sheet as of March 25. For May 2011, the values in RBI database are significantly high, and it is due to an extra digit (0) at the end of the numbers, we have removed the same in our data series to make it consistent. For September 2011, we have used the balance sheet series as of September 16, 2011, to normalise the foreign security value. For October and November 2011, RBI database shows a drop in Gold and Bullion which we think is not accurate, to normalise the same we have added a 0 at the end of the values for these two components. It is noteworthy that whenever the RBI has initiated liquidity absorption through market stabilisation scheme, the governement deposits have increased. 

For the annual series, to calculate components as a percentage of GDP, we have taken the GDP values for the period July-June for each year, so that it matches the estimation period of the RBI balance sheet. 

RBI Balance sheet-Annual

Note: The years are represented as per RBI's balance sheet estimation period which is between July to June. For instance, 2019 represents the period between July'18 - June'19.

For more information, please visit the official website.

Next release date: June 16 , 2020