RBI Annual Report 2019-20: What does the report say about Economic Recovery, NPAs and Bank Frauds?
On August 25, 2020, the Reserve Bank of India released an Annual Report for the FY 2019-20. The Reserve Bank of India follows July to June fiscal year. The total income of the bank has increased by 28.97% to Rs 53.3 lakh crore from Rs 41 lakh crore.
Increase on the Asset side
1- Increase in domestic and foreign investments by 18.4% and 27.3% respectively.
2- Increase in loans and advances by 245.8%.
3- Increase in gold by 52.9%.
The Foreign currency and gold assets sum up to 71.25% of the bank's total assets while the domestic assets constituted the rest.
Increase on the Liability side
The increase in notes issued, other liabilities and provisions, and deposits is 21.5%, 30.5% and 53.7% respectively.
Financial Health of the Banks
Moratoriums on loan instalments, deferment of interest payments and restructuring may have an effect on the financial health of the banks.
The RBI has previously warned in its Financial Stability Report that the NPA of all the Scheduled Commercial Banks (SCBs) may surge from 8.5% in March 2020 to 12.5% by March 2021 and to 14.7% by March 2021 in case of a severe pandemic situation.
The consumer confidence hits an all-time low in July this year. The people in the country have a fear of job losses, pay cuts, etc. and thus, they will take time to start spending the money.
Risk aversion by Banks
The banks have become extremely careful while giving fresh loans to borrowers as it may turn into the bad loan in the future. Also, the bank credit growth has slowed significantly in the year 2020 despite RBI's efforts to infuse Rs. 8-9 lakh crore liquidity into the system through various schemes.
Earlier this year in March, the RBI has cut the repo rate by a total 115 basis points.
The report noted a surge in the bank fraud cases of Rs. Rs.1,00,000 and above value. The number of such frauds has increased by 28% in volume.
Key Highlights of the Report
1- The balance sheet of the Reserve Bank of India increased by 13.42%.
2- The total income in the fiscal year 2019-20 was Rs. 1,93,036.
3- The expenditure for the FY 2019-20 decreased by 39.72%.
4- The interest income of the bank for the financial year 2019-20 increased by 44.62%.
5- The RBI holdings of Government Securities for the financial year 2019-20 increased by 57.19%.
6- The value of bank fraud cases has increased by 74%, most of which were related to loans.
7- The Gross Non-Performing Ratio of the banking system has declined to 9.1% as compared to 11.2% in March 2019.
8- The currency in circulation has soared 17% from the previous year.
9- Till June 2019, the RBI held 618.16 metric tonnes of gold as compared to 566,23 tonnes held in June 2018.
10- The surplus of Rs. 57,128 crore was transferred to the Central Government by the RBI.
The report further stated that the economy of the country will continue to contract due to the coronavirus pandemic and subsequent lockdown. The report also noted that inflation will increase due to the disruption in the supply chains. Also, in the year 2019-20, not even a single Rs. 2000 currency note was printed.