Indian Reserve Bank Annual Report

Reserve Bank Annual Report:-

Demonetization & Fake Currency-

It has seen that out of 15.41 Lakh Crore money in circulation,  RS. 15.31 Lakh Crore has been returned. That means about 99.3% of the funds were returned in the form of RS. 500 and RS. 1000 note. RS. 10000 Crore of this notes did'nt reach RBI vault. Now probes are going on regarding lumpsum deposits in banks.

There was a rise in fake notes of RS. 500, RS.2000 and RS. 50 in circulation. However, the number of fake currencies detected has decreased from 762,076 pieces in 2016- 2017 to 522,783 pieces in 2017-2018. That means out of total fake notes in circulation in 2016-17, has been reduced to half (RS. 23 Crore).

Savings & Digital Payment-
Demonetization has increased the dis-savings of household to 2.8%, which means deposits from people has reduced to 2% out of Gross National Disposal Income[GNDI]. Household savings in financial sector has-been increased to 11.1% in 2017-18 from 9.1% in 2016-17 (revised of 11.8%). Demonetization did'nt bring people to cashless mode.

Demonetization has made the increase of digital payment to 45% in volume and 28% in value. After demonetization, the value of digital transaction is above 25%. Here we can see growth and value growing together.

RBI has paid a dividend of RS. 50000 Crore to the Central Government plus an interim dividend of RS. 10000 Crore in 2017-18.  RBI has set aside RS.14,190 Crore as contingency fund to cope with depreciation in securities, exchange differences or losses due to rupee depriciation and even price of  crude oil goes up, to suffice the inflationary cost. Development and contingency fund must be near to 10% as India is facing the after-effects of El Nino, but in balance sheet, we can see the allocation is just 7%.

PNB Fiasco & NPA-
Punjab National Bank Fiasco and other NPA's are in total about RS. 41,000 Crore and the number of defaulted cases has been increased to 5835 cases in 2017-18 compared to 4500 cases, for an average of 10 years.

After the end of March 2018, we see out of RS. 100, RS. 12 has been considered bad lending by the banks. This will be increasing in later part of the year as RS. 1.7 Lakh Crore of Investment done in power sector is going to be added as bad loans. So, bad loans are going to increase later.

Growth Rate & Retail Inflation-
The projection of GDP growth of India is considered to be 7.4% till the fiscal 2019-20. This growth is powered by rural and urban consumption, investment and exports. But as trade war is zooming in world economy, growth in export is in questionable position.

43% of fund flows from banking sector to commercial sector, is a good sign in 2017-18, whereas in 2016-17, the fund flow was 26.7%. Bad loan issues must be settled faster and banks must be recapitalized. Unless system is not corrected, recapitalization is of no use.

RBI's retail inflation target is considered to be 4.6% from July  to September, 2018; 4.8% from October, 2018 to March, 2019 and 5% in the first Quarter of 2019.