Five key numbers in the RBI Annual Report

RBI's annual report shows a 47% increase in its total income, which led to a higher dividend payment to the Centre and an increase in contingency requirements

The Reserve Bank of India released its annual report for the year 2022-23 on May 30. The report provides information on the RBI’s functioning through the fiscal year as well as the state of the economy. Here are five data points which highlight some important aspects of the report.

FILE PHOTO: A woman walks past the Reserve Bank of India (RBI) logo inside its headquarters in Mumbai, India, April 6, 2023. REUTERS/Francis Mascarenhas/File Photo (REUTERS)

2022-23 saw a 47% increase in RBI’s total income

RBI’s total income in 2022-23 was ₹2.35 lakh crore, which is 47% more than the ₹1.6 lakh crore number for 2021-22. “The sharp increase in the RBI’s income comes from profits from its foreign exchange (FX) sales ( ₹1 lakh crore), reflecting its active FX intervention. In addition, higher interest income ( ₹1.3 lakh crore) on its holdings of domestic and foreign securities has more than offset losses on its liquidity operations,” Nomura economists Aurodeep Nandi and Sonal Varma said in a note.

RBI’s income gains in the previous fiscal year have led to a higher dividend payment to the central government and an increase in the amount it keeps to meet contingency requirements. RBI will transfer a dividend of ₹87,416.2 crore to the Centre, more than double the amount transferred in 2021-22. “The higher RBI dividend is a fiscal windfall of over ₹50,000 crore (0.17% of GDP) for the government, but it is likely to be neutralized by an equal amount of slippage on the fertilizer subsidy,” the Nomura note added.

RBI’s buffer provisions are now valued at 6% of its balance sheet, which is more than the 5.5% number for 2021-22. RBI’s new capital economic framework mandates buffer provisions between 5.5%-6.5% of its balance sheet.

Lending rates are back to pre-covid levels in most sectors.

Between May 2022 and February 2023, RBI’s Monetary Policy Committee (MPC) has administered a cumulative rake hike of 2.5 percentage points in the policy rate. Data on weighted average lending rates (WALR) for various kinds of loans shows that the rate hikes have led to a significant increase in retail lending rates and barring education loans, almost all of them are now above pre-Covid levels. WALR for housing loans has seen an increase of more than 2 percentage points.

Share of bad loans in total lending continues to fall

The report also shows that the ratio of non profitable assets (NPAs) to total loans continues to fall. Gross NPA as share of total advances has fallen from 15.5% in 2018-19 to 5.8% in the quarter ending December 2022. While public sector banks continue to have higher NPA ratios, they have seen a large reduction in their NPA ratio. The annual report notes that loan moratorium programmes such as the Emergency Credit Line Guarantee Scheme (ECLGS) played an important role in preventing a proliferation of stress in the banking system during the pandemic.

Number of bank frauds has increased but the amount involved has come down

2022-23 saw 13,530 cases of bank frauds involving an amount of ₹30,252 crore. These numbers were 9,097 and ₹59,819 crore in 2021-22. Frauds on advances, which includes wilful loan defaults have fallen sharply in the last two years from ₹1.3 lakh crore to ₹28,792 crore in 2022-23. Close to 70% of the amount involved in total bank frauds were in public sector banks. The private sector, however had a two-thirds share in the number of banking fraud cases.

FDIs are at their lowest since 2019-20

Total Foreign Direct Investment (FDI) fell to a three-year low of $46 billion in 2022-23 according to the provisional estimates of the RBI annual report. This is 26% lower than the previous fiscal year. FDI in manufacturing sector fell 30% to $11.3 billion in 2022-23 on an annual basis. To be sure, FDI in manufacturing in 2022-23 is still higher than what it was between 2018-19 and 2020-21. “In aggregate, FDI inflows into PLI-linked sectors have not significantly gone up after the scheme was announced. It was averaging around USD 4bn in FY18 and FY19 and saw a sharp pickup in FY20 to USD 7.6bn (most likely because of a large investment in the automotive sector). However, this has now moderated to USD 4-5bn again in FY22 and FY23,” Citibank chief India economist Samiran Chakraborty pointed out in a report released on May 24. PLI refers to production-linked incentive – these have been announced in several sectors to encourage local manufacturing.