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| Edited By: Parnika Sokhi |Source: DNA |Updated: Mar 17, 2018, 05:08 AM IST
The impact of a slew of steps taken by the Reserve Bank of India (RBI) to manage liquidity conditions in the country during the last fiscal is clearly visible in its annual report.
The apex bank’s gross income fell from `60,731 crore in fiscal 2009 to `32,884 crore in fiscal 2010.
“In monetary operations, sustained period of large net absorption of liquidity through reverse repo also involved higher net interest outgo,” the apex bank said in its annual report.
Repo is the rate at which RBI lends money to banks for one day to a week and hence earns interest on it, while it has to pay interest in reverse repo where banks’ funds are parked with it.
Starting fiscal 2009, RBI had maintained the difference between repo and reverse repo at 175 basis points in April 2008 after which it went as wide as 300 basis points in August 2008, when the repo rate was 9% and reverse repo 6%. In April 2009, the gap was down to 150 points, which was maintained throughout the year.
It was only in the first quarter review of the current financial year that the corridor was tightened to 125 basis points. Currently, the repo rate is at 5.75% and reverse repo rate at 4.50%.
The apex bank’s earnings from foreign sources include earnings from the deployment of foreign currency assets and gold, which decreased by 50.58% from `50,796 crore in fiscal 2009 to `25,102 crore in fiscal 2010.
The bank attributed this decline to prevailing low interest rate enviornment in the international markets. The earnings from domestic sources also saw a decline of 21.68% from `9,935 crore in fiscal 2009 to `7,781 crore in fiscal 2010.
The bank’s total expenditure increased by 2.25% from Rs8,218 crore in fiscal 2009 to Rs8,403 crore in fiscal 2010.
For fiscal 2010, the central bank allocated Rs18,759 crore for transferring to the government, which is lower than Rs25,009 crore it allocated for the same purpose in the previous year. The amount is allocated after transferring to contingency reserve and asset development reserve.
