The Reserve Bank of India (RBI) in its ‘Annual report for 2021-2022’ has cautioned commercial banks of the risk of increased slippages on advances that were restructured during the Covid-19 pandemic.
- Slippages are when a bank’s assets become a non-performing asset (NPA) owing to the borrower not paying interest for over 90 days.
- While, advances are funds provided by the bank to an entity for a specific purpose, to be repayable after a short duration.
Reason behind this Caution:
Banks had extended moratorium on repayment of loans and restructured advances to businesses to help them combat the impact of the Covid-19 pandemic and subsequent lockdowns. Now, this has increased the risk of slippages on advances.
Key Recommendations by RBI for Asset Management:
i.The setting up of the National Asset Reconstruction Company Ltd. (NARCL) will help in the resolution of large value, legacy stressed assets, and will serve as a time-efficient mechanism for reviving investor interest in primary and secondary markets for stressed assets.
ii.Also, the setting up of the National Bank for Financing Infrastructure and Development (NABFID) will shift the burden of long-term financing away from banks.
- The NABFID can also help in the development of bond and derivatives markets that are necessary for infrastructure financing.
iii.It also instructed NBFCs (Non Banking Financial Companies) and Urban Cooperative Banks (UCBs) to ensure robust asset-liability management in their balance sheets, apart from improving the quality of their credit portfolios.
Note – Gross Non-Performing Assets (GNPA) ratio of all scheduled commercial banks (SCBs) moderated to its lowest level in six years
RBI’s balance sheet increased by 8.46 pc in FY22 to Rs 61.9 lakh crore
As per the Annual Report Data, RBIs balance sheet has increased by Rs 4,82,633.14 crore, i.e, 8.46% from Rs 57,07,669.13 crore as on March 31, 2021 to Rs 61,90,302.27 crore as on March 31, 2022.
- However, FY22 ended with an overall surplus of Rs 30,307.45 crore as against Rs 99,122 crore in the FY21, resulting in its decrease of 69.42%.
- In May 2022, RBI had approved transfer of this surplus (Rs 30,307.45 crore) to the government.
i.RBI’s Income in FY22 increased by 20.14%, expenditure rose by 280.13% from Rs 34,146.75 crore in FY21 to Rs 1,29,800.68 crore in FY22.
ii.The increase on the asset side was due to rise in foreign investments, domestic investments, gold, and loans and advances by 4.28%, 11.67%, 30.07% and 54.53%, respectively.
iii.On the liability side, the increase was due to rise in deposits and notes by 16.24% and 9.86%, respectively.
iv.The domestic assets constituted 28.22% while the foreign currency assets and gold (including gold deposit and gold held in India) constituted 71.78% of total assets as on March 31, 2022 as against 26.42% and 73.58%, respectively, as on March 31, 2021.
- As on March 31, 2022 total gold held by RBI was 760.42 metric tonnes as compared to 695.31 metric tonnes as on March 31, 2021.
v.In FY2021-22 Provisions of Rs 1,14,567.01 crore and Rs 100 crore were made and transferred to Contingency Fund (CF) and Asset Development Fund (ADF).
vi.During FY22, against the target for agricultural credit of Rs 16.5 lakh crore, banks achieved 104% of the target (Rs 17.09 lakh crore) as on March 31, 2022.
vii.On financial inclusion, the number of banking outlets in villages including branches, banking correspondents and other modes increased from just 67,694 in March 2010 to 12.53 lakh by December 2020 and further to 19 lakh by December 2021.
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Rs 100 currency notes, Rs 5 coin most preferred in India
As per the RBI survey of Consumers on Bank Notes, Indian people most prefer the Rs 100 denomination banknotes, while Rs 2,000 are least preferred.
A diverse sample of 11,000 respondents from rural, semi-urban, urban and metropolitan areas, spanning 28 states and three union territories participated in the survey. The survey also included 351 visually impaired respondents (VIR).
- It covered respondents from the age of 18 to 79 years with a gender representation of 60:40 for males and females.
i.The total number of Rs 2000 notes comprised only 214 crore or 1.6% of the total currency notes in circulation.
ii.Among coins, denomination of Rs 5 was the most preferred whereas Re 1 was the least preferred.
iii.Watermark of Mahatma Gandhi’s image followed by windowed security thread were the most recognised security feature.
iv.Around 3% of the respondents were not aware of any banknote security feature.
v.Approximately 7out of 10 respondents were found to be satisfied with the new series of banknotes.
vi.Among VIR, majority were found to be aware of the quality of paper and size of the banknotes.
Bank Notes in Circulation
i.The value and volume of banknotes in circulation increased by 9.9% and 5%, respectively, during FY22 as compared with 16.8% and 7.2%, respectively, during FY21.
ii.In volume terms, 500 denomination constituted the highest share at 34.9%, followed by 10 denomination banknotes, which constituted 21.3% of the total banknotes in circulation as on March 31, 2022.
iii.The total value of coins in circulation increased by 4.1% in FY22, while the total volume increased by 1.3% during the same period.
79,669 pieces of fake Rs 500 notes detected in FY-22
The total number of Fake Indian Currency Notes (FICNs) of all denominations detected in the banking sector increased to 2,30,971 pieces from 2,08,625 pieces in the FY21.
- The number of fake currency note of Rs 500 denomination detected by the banking system more than doubled to 79,669 pieces in FY22 over the 39453 pieces in FY21
i.The number of counterfeit notes of Rs 2,000 denomination detected in the system was 13,604 pieces during FY22, up 54.6% from the preceding financial year.
ii.The counterfeit notes detected in the denominations of Rs 50 and Rs 100 declined by 28.7% and 16.7%, respectively.
iii.During FY22, out of the total FICNs detected in the banking sector, 6.9% were detected at the RBI and 93.1% at other banks.
iv.The total expenditure incurred on security printing during FY22 was Rs 4,984.8 crore as against Rs 4,012.1 crore in the previous year (July 1, 2020 to March 31, 2021).
v.The disposal of soiled banknotes increased by 88.4% to 1,878.01 crore pieces during FY22 from 997.02 crore pieces in the previous year.
Frauds to the tune of Rs 60,414 crore were reported in FY22, down 56.28 per cent from Rs 1.38 trillion in 2020-21
India’s Merchandise Export hit a record of $421.9 billion in FY 2021-22
Recent Related News:
i.On January 12, 2022, the Reserve Bank of India (RBI) released the Annual Report of the Ombudsman Schemes for 2020-21, which has been prepared for the 9-month period, i.e., July 1, 2020, to March 31, 2021, in alignment with the change in the Financial Year of RBI from ‘July – June’ to ‘April – March’ with effect from July 1, 2020.
ii.RBI has approved Fino Payments Bank for commencing international remittance
business under the Money Transfer Service Scheme (MTSS).
About RBI’s Annual Report:
It is a Report of the Central Board of Directors on the working of the RBI for the year ended March 31, 2022 which is submitted to the Central Government in terms of Section 53(2) of the Reserve Bank of India Act, 1934.