MUMBAI: Reserve Bank of India (RBI) appears to have had an inkling of the volatility in the foreign exchange markets that was to follow later during the year. In its balance sheet for the year 2012-13, RBI has increased the size of the war chest that it has built up for times of volatility in the financial markets.......
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
1 comment:
The rise in reserves by 0.4 per cent to 10.1 per cent (against the recommended 12 per cent of the balance sheet size) is a positive signal. A central bank with a strong balance sheet will be an added support to the government when fiscal policy is in rough weather. To ensure that external compulsions do not dilute the strength of RBI’s balance sheet, the government should take measures to augment the share capital of RBI after carrying out appropriate amendments to the RBI Act. It should be obligatory on the government’s part to maintain RBI’s capital and reserves at a certain pre-decided level (say, at 12 per cent of the balance sheet size, till a scientific assessment of the requirement is made). Till such time, ideally, RBI should be allowed to retain surplus income by transfer to reserves. The present practice of ‘budgeting’ a lump sum receipt from organizations including RBI in which GOI has shareholding and depending on RBI to make good the shortfall is not healthy.
Considering the size of its balance sheet and the internal and external pressures on its income generating capabilities, the central bank’s reserves need to be augmented on an ongoing basis. RBI, on its part, should think in terms of generating reasonable income from deployment of captive funds it is mandated to manage, without compromising on the safety of investments. In this context, the addition to holdings in gold was a welcome beginning. The Bank should, at this stage seriously consider realignment of its portfolios especially under forex reserves, with more focus on non-dollar components including gold.
Post a Comment