....Till the late 1980s, the approach was that the RBI should reveal the bare minimum required by law and secrecy was the hallmark. Progressively, a more enlightened approach emerged and the RBI now provides a more meaningful presentation. The RBI Accounts and Balance Sheet provide a Magnetic Resonance Image (MRI) of the health of the economy and is very different from a corporate balance-sheet. When the RBI balance-sheet swells, it invariably portends a difficult situation for the economy. Quite often, an increase in the RBI profits is a cause of concern and the payment of dividend (by way of the surplus transferred to government) is no different from created money.......
1 comment:
The simple language in which the precarious position of the economy which is the result of a lifestyle accepted by it post-LPG(Liberalisation-Privatisation-Globalisation) has been explained goes well with the transparency in policy announcement and accounting being exhibited by RBI in recent years. If powers that be refuse to listen and make drastic changes in fiscal policy to reduce the obesity of the RBI’s balance sheet, the saddest thing mentioned in the article, namely the death of the central bank, may happen and then, there should be no excuse that the diagnosis was delayed.
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.
M G Warrier, Mumbai
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