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Contingency reserve darts up to 11.7% of assets

BS Banking Bureau in Mumbai

The contingency reserve and asset development reserve of the Reserve Bank of India have increased to a combined 11.7 per cent of the total assets as on June 30, 2002, as against 9.9 per cent in the previous year.

The RBI has reached this level in a faster than intended manner. The apex bank had set a target of 12 per cent of the total assets to be achieved in phases by 2005.

The CR is maintained by the central bank to enable it to absorb unexpected and unforeseen contingencies. The balance in this reserve has risen by 32.64 per cent in the year to Rs 48,434.17 crore (Rs 484.34 billion) as against Rs 36,514.13 crore (Rs 365.14 billion) in the previous year.

The central bank has transferred to the CR an unutilised balance of Rs 4,224 crore (Rs 42.24 billion) from the National Industrial Credit Fund, Rs 700 crore (Rs 7 billion) from the National Housing Credit Fund and Rs 6,996.04 crore (Rs 69.96 billion) from the income. The central banks said the balance in the CR was sufficient to meet contingent liabilities.

The asset development reserve was created in 1997-98 to meet the internal capital expenditure of the RBI and to make investments in its subsidiaries. The aim is to reach one per cent of the RBI's total assets within the overall target of 12 per cent set for the CR.

The funds in the asset development reserve have increased by 21.37 per cent to Rs 4,700.54 crore (Rs 47 billion) as on June 30, 2002, as against Rs 3,872.63 crore (Rs 38.73 billion) in the previous year.

The Currency and Gold Revaluation Account, which was earlier known as the Exchange Fluctuation Reserve, has seen an accretion of 75.14 per cent to Rs 55,010.77 crore (Rs 550.11 billion) as on June 30, 2002, against Rs 29,124.44 crore (Rs 291.24 billion) in the previous year.

At the end of June 2002, the CGRA was at 18 per cent of the foreign currency assets and gold holdings of the RBI due to appreciation of foreign currency assets, as against 14.2 per cent at the end of June 2001.

The balance in the Exchange Equalisation Account, which is used to meet exchange losses on an accrual basis in respect of liabilities under schemes involving exchange guarantees provided by the Reserve Bank and for exchange losses arising out of forward commitments, was at Rs 51.5 crore (Rs 515 million) as on June 30, 2002, as against Rs 49.46 crore (Rs 495 million) in the previous year.

The RBI has said that there is no scheme at present involving exchange guarantees and the utilisation of the account was only for meeting the loss on forward commitments.

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