Skip to main content

Highlights of RBI Annual Report 2023-24 – Chapter 1 to 3

Reserve Bank of India (RBI) has published its annual report for the financial year 2023-24. In a series of articles, we will go through the highlights of the report. This is the first article in the series. 

Legal framework for publication of Annual Report by RBI

Report of the Central Board of Directors on the working of Reserve Bank of India (RBI) for the year is submitted to the Central Government in terms of Section 53(2) of Reserve Bank of India Act, 1934 (RBI Act, 1934).

The letter of transmittal is signed by the RBI Governor and addressed to the Finance Secretary, Ministry of Finance, Government of India.

Documents submitted by RBI to the Central Government

In pursuance of Section 53(2) of RBI Act, 1934, the following documents have been submitted to the Central Government –

  • A copy of the Annual Accounts for the year ended March 31, 2024 certified by RBI’s Auditors and signed by Chief General Manager-in-charge, Deputy Governors and Governor.
  • 2 copies of the Annual Report of the Central Board on the working of RBI during the year ended March 31, 2024.

Chapter 1 – Assessment and Prospects

  • Global growth decelerated to 3.2% during 2023 from 3.5% during 2022. 
  • Global economy is projected to grow by 3.2% each in 2024 as well as in 2025.
  • Global inflation eased to 6.8% in 2023 from 8.7% in 2022 on the back of monetary tightening and restoration of supply chains.
  • Global inflation is projected to moderate to 5.9% in 2024 and 4.5% in 2025.
  • Indian economy expanded at a robust pace in 2023-24, with real Gross Domestic Product (GDP) growth accelerating to 7.6% from 7.0% in the previous year – the third successive year of 7% or above growth.
  • India’s real GDP growth for 2024-25 is projected at 7.0%.
  • Headline inflation softened to 5.4% during 2023-24 from 6.7% in the previous year, driven by the fall in core inflation [Consumer Price Index (CPI) excluding food and fuel] to 4.3% from 6.1%.
  • CPI inflation for 2024-25 is projected at 4.5%.
  • Wholesale Price Index (WPI) inflation averaged (-)0.7% during 2023-24 (as compared with 9.4% a year ago).
  • Indian Rupee (INR) depreciated by 1.4% during 2023-24 (7.8% in the previous year).
  • Gross Fiscal Deficit (GFD) declined to 5.9% of GDP in 2023-24 (RE) from 6.4% of GDP in 2022-23.
  • GFD has been budgeted at 5.1% of GDP for 2024-25.
  • India’s current account deficit (CAD) narrowed in 2023-24 (April-December) to 1.2% of GDP from 2.6% of GDP a year ago. This was the outcome of a fall in the merchandise trade deficit as well as a higher surplus in services trade.
  • UPI platform achieved significant milestones, surpassing 13 billion transactions in a single month in March 2024.
  • A risk-based authentication mechanism, as an alternative to SMS-based one-time password (OTP) for additional factor of authentication (AFA), would be effectuated to address risks in payments.
  • ‘Pradhan Mantri Surya Ghar: Muft Bijli Yojana’ aims to provide free electricity to 1 crore households and a subsidy of up to 40% of the cost of the solar panels to install it on their roofs.
  • According to the Climate Change Performance Index (CCPI) Report 2024, India’s climate action performance improved, making India the 4th best performing nation among 63 countries analysed.

Chapter 2 – Economic Review

  • The withdrawal of ₹2000 banknotes during the year and their return as bank deposits led to a deceleration in currency in circulation as well as reserve money while simultaneously contributing to an acceleration in deposit growth.
  • The average spread of the weighted average call rate (WACR) relative to the policy rate was (+)13 basis points (bps) in 2023-24 as compared with (-)12 bps in 2022-23.
  • BSE Sensex crossed the 74,000 mark - a fresh peak - in March 2024 following strong GDP growth data for Q3:2023-24.
  • Banks mobilised additional resources through certificates of deposit (CDs) to bridge the credit-deposit gap.
  • RBI’s balance sheet size increased to 24.1% of GDP at end-March 2024 from 23.5% at end-March 2023. The balance sheet has normalised to its pre-pandemic level.
  • Net Foreign Assets (NFA) of RBI consists of gold and Foreign Currency Assets (FCA). FCA includes Special Drawing Rights (SDRs) transferred from the Government of India (GoI). The remaining SDR holdings with the GoI and reserve tranche position (RTP) in the International Monetary Fund (IMF), which represents India’s quota contribution to the IMF in foreign currency, are not a part of RBI’s balance sheet.
  • In Union Budget 2023-24, the government announced the revamping of credit guarantee scheme for micro and small enterprises with effect from April 01, 2023, with an infusion of ₹9,000 crore to the corpus to enable additional collateral-free guaranteed credit of ₹2 lakh crore and the reduction in the cost of the credit by about 1%. Besides, the limit on ceiling for guarantees has been enhanced from ₹2 crore to ₹5 crore.
  • Inward remittances to India stood at US$ 86.7 billion in 2023-24 (April-December). India remains the highest remittance receiving economy globally.
  • According to the World Bank, India’s inward remittances are estimated at US$ 135 billion in 2024, with a share of 15.2% in global remittances.
  • At end-December 2023, India’s foreign exchange reserves were 5 times higher than short-term external debt on original maturity basis and more than 2 times short-term external debt on residual maturity basis. 
  • As at end-March 2024, foreign exchange reserves provided a cover of 11.4 months of imports for 2023-24. 
  • India’s foreign exchange reserves rose to an all-time high of US$ 648.7 billion as on May 17, 2024.

Chapter 3 – Monetary Policy Operations

  • Monetary Policy Committee (MPC) kept the policy repo rate unchanged at 6.50% during 2023-24 and continued with a stance of withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth. 
  • RBI issued a directive under Section 42(1A) of RBI Act, 1934 requiring all scheduled banks to maintain with RBI, effective from the fortnight beginning August 12, 2023, an incremental cash reserve ratio (I-CRR) of 10% on the increase in net demand and time liabilities (NDTL) between May 19, 2023 and July 28, 2023. 
  • I-CRR was reviewed on September 08, 2023, and discontinued in a phased manner. Accordingly, 25% of the impounded I-CRR funds was released on September 09, another 25% on September 23 and the remaining 50% was released on October 07, 2023. 
  • I-CRR was applied as a temporary measure during August 12 to October 07, 2023 to absorb the surplus liquidity resulting from the return of ₹2000 banknotes to the banking system.
  • System liquidity turned into a deficit in H2 on account of the build-up of government cash balances and festival related currency outgo.
  • The reversal of liquidity facilities under both the Standing Deposit Facility (SDF) and the Marginal Standing Facility (MSF) were allowed even during weekends and holidays with effect from December 30, 2023.
  • The interest rate spread (IRS) - the difference between the weighted average lending rate on fresh loans and the weighted average rate on total deposits of banks – impacts monetary transmission.

References

Reserve Bank of India. (2024, May 30). 'RBI Annual Report 2023-24'. Retrieved from https://www.rbi.org.in/Scripts/AnnualReportPublications.aspx?year=2024


Follow at - Telegram   Instagram   LinkedIn   X   Facebook

Labels:

Comments

Post a Comment

Popular Posts

Payment of Agency Commission to Agency Banks (ABs) and Disbursement of Government Pension by ABs

Reserve Bank of India (RBI) has issued guidelines on the conduct of Government business by Agency Banks (ABs), payment of agency commission to ABs and disbursement of Government pension by ABs. Who are ABs? ABs mean all Public Sector Banks (PSBs), scheduled Private Sector Banks (PVBs), scheduled Payments Banks (PBs), and scheduled Small Finance Banks (SFBs) appointed by the RBI under Section 45 of the RBI Act, 1934, by mutual agreement, to carry out Government banking business of the Central Government (CG) / State Governments (SGs). What is agency commission? Agency commission means the remuneration paid by the RBI to an AB in consideration of it acting as an agent of the RBI in the conduct of general banking business of the CG and the SGs at the places and in the manner specified in the agreement between the RBI and the bank, with the exception of the functions relating to the management of the public debt. What are the guidelines on appointment of ABs? Any eligible bank which intend...
Post a Comment
Read more

Credit Cards and Debit Cards

Reserve Bank of India (RBI) has issued directions on issuance of credit cards and debit cards. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Non-Banking Financial Companies (NBFCs) for all layers – NBFC-Investment and Credit Companies (NBFC-ICC) NBFC-Factor  NBFC-Micro Finance Institutions (NBFC-MFI)  Housing Finance Company (HFC)  What is a credit card? Credit Card is a physical / virtual payment instrument issued with a pre-approved revolving credit limit that can be used to purchase goods and services or draw cash advances. What is a debit card? Debit Card is a physical / virtual payment instrument linked to a Savings Bank / Current Account which can be used to withdraw cash, make online payments, do Point of Sale (PoS) terminal / Quick Response (QR) code transactions, fund transfer, e...
Post a Comment
Read more

Deposits between a person resident in India and a person resident outside India

Reserve Bank of India (RBI) has updated the regulations on deposits between a person resident in India and a person resident outside India. What are the restrictions on deposits between a person resident in India and a person resident outside India? No person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India. However, the following deposits are exempted – Deposits held in rupee accounts maintained by foreign diplomatic missions and diplomatic personnel and their family members in India with an authorised dealer. Deposits held by diplomatic missions and diplomatic personnel in special rupee accounts namely Diplomatic Bond Stores Account to facilitate purchases of bonded stocks from firms and companies who have been granted special facilities by customs authorities for import of stores into bond. The funds in the account may be repatriated outside India without the approval of the RBI. Deposits held in accounts maintained in foreig...
Post a Comment
Read more

Credit Derivatives

Reserve Bank of India (RBI) has issued directions on credit derivatives. What is Credit Derivative? Credit derivative means a derivative contract whose value is derived from the credit risk of an underlying debt instrument or an index of underlying debt instruments. What is Credit Default Swap (CDS) and Total Return Swap (TRS)? Credit Default Swap (CDS) means a credit derivative contract in which one counterparty (protection seller) commits to pay to the other counterparty (protection buyer) in the case of a credit event with respect to a reference entity and in return, the protection buyer makes periodic payments (premium) to the protection seller until the maturity of the contract or the credit event, whichever is earlier. Total Return Swap (TRS) means a credit derivative contract under which one counterparty (total return payer) commits to transfer the entire economic performance of a reference asset to the other counterparty (total return receiver), and, in return, receives a pre-d...
Post a Comment
Read more

Lead Bank Scheme (LBS)

Reserve Bank of India (RBI) has issued guidelines on the Lead Bank Scheme (LBS). Who is a Lead Bank? RBI designates a commercial bank as Lead Bank in each district, to coordinate the efforts of the banks, Government, National Bank for Agriculture and Rural Development (NABARD) and other stakeholders at the district level to improve credit flow to the priority sectors and promote financial inclusion in the district. 12 public sector banks and 2 private sector banks (Jammu & Kashmir Bank and ICICI Bank) have been assigned lead bank responsibilities, covering 778 districts across the country. What appointments are made under the LBS? Every lead bank shall appoint a Lead District Manager (LDM) in each district where it has the lead bank responsibility, to exclusively oversee and coordinate the implementation of the LBS in the district. NABARD shall appoint a District Development Manager (DDM) for each district to act as a liaison between NABARD and the district-level banking and financ...
Post a Comment
Read more