RBI’s Annual Report 20­22-2023 announced

RBI’s Annual Report 20­22-2023

The Annual Report 2022-23 of the Reserve Bank of India (RBI) has been published, presenting an overview of the RBI’s operations during the fiscal year that ended on March 31, 2023. This report, as per the provisions of Section 53(2) of the RBI Act, 1934, has been submitted to the Central Government. In FY23, India has witnessed a stable macroeconomic and financial environment, characterized by consistent growth. Over the past five years, India’s contribution to global growth has averaged more than 12%.

RBI’s Annual Report 20­22-2023, Highlights of the RBI’s Annual Report

a). Assessment and Prospects of Domestic Economy:

i. Growth: As per the second advance estimates (SAE) of national income released by the National Statistical Office (NSO), the Indian economy is expected to have achieved a 7.0% growth in real Gross Domestic Product (GDP) in FY23, compared to 9.1% in FY22.

• Despite challenges, the agriculture sector and related activities demonstrated resilience in the fiscal year 2022-23, with a growth of 3.3% in gross value added (GVA). The production of kharif oilseeds, sugarcane, and cotton witnessed an increase during FY23.
• Looking ahead, the projected real GDP growth for FY24 stands at 6.5%, with risks being evenly balanced.

ii. Inflation: Overall, headline inflation increased to 6.7% in 2022­23 from 5.5% in 2021­-22. Inflation reached a peak of 7.8 per cent in April 2022 due to sharp increase in global prices of crude oil, food, fertilisers and metals.

iii. Deficit and Debt:

i. The general government deficit and debt moderated to 9.4% and 86.5% of GDP, respectively, in FY23 from the peak levels of 13.1% and 89.4% in FY21, respectively.
ii. The gross fiscal deficit (GFD) of the government declined from 6.7% of GDP in FY22 to 6.4% of GDP in 2022-­23.
iii. India’s current account deficit (CAD) was at 2.7% of GDP during April­-December 2022.

b). FDIs are at their lowest since FY20

1. According to the annual report of the Reserve Bank of India (RBI), the total Foreign Direct Investment (FDI) received by India in FY23 reached a three-year low of USD 46 billion. This amount is 26% lower than the FDI recorded in the previous fiscal year (FY22), which was USD 58.8 billion. In comparison, the FDI flow in FY21 was USD 59.6 billion, and in FY20, it was USD 50 billion. Furthermore, the net capital inflows under FDI were also lower in FY23 at USD 28.0 billion, compared to USD 38.6 billion in FY22.
2. The surplus liquidity absorbed under the LAF (Liquidity Adjustment Facility) moderated from a daily average of Rs 6.6 lakh crore in March 2022 to Rs 0.14 lakh crore in March 2023.
3. India emerged as the largest player in real­time transactions at the global level, with a 46% share in 2022.

Note: FDI in the manufacturing sector fell 30% to $11.3 billion in 2022-­23 on an annual basis.

Top 3 FDI Flows in India in FY23

Source/Industry	FY23 (FDI in USD billion)
Country Wise Inflows
Singapore	17.2
Mauritius	6.1
United States	6
Sector­-wise Inflows
Manufacturing	11.3
Financial Services	6.8
Computer Services	5.6

c). Non-­Performing Assets:

The Gross Non-Performing Assets (NPA) as a share of total advances has decreased from 15.5% in 2018-19 to 5.8% in the quarter ending December 2022. Although public sector banks still have higher NPA ratios, they have witnessed a significant reduction in their NPA ratio.

d). Merchandise Trade

1. India’s merchandise exports at USD 450.4 billion recorded a growth of 6.7%in FY23 as compared with 44.6% in FY22.
2. India’s merchandise imports at USD 714.0 billion recorded a growth of 16.5% in FY23.
3. Petroleum, oil and lubricants (POL) imports constituted the largest item in India’s import, accounting for 29.3% of the overall imports in FY23.
4. Gold imports at US$ 35.0 billion declined by 24.2 per cent in 2022-­23.
5. India is the largest importer of vegetable oil globally. India’s import bill on vegetable oil rose to USD 20.8 billion in 2022­23 from USD 19.0 billion in FY22.

e). DICGC’s Deposit Insurance

1. To protect the small investors, DICGC offers deposit insurance of Rs 5 lakh (including the principal and interest amount) per depositor for each bank (within 90 days) in the event of the bank being unable to fulfil its commitment due to liquidation or cancellation of the banking licence. Deposit Insurance and Credit Guarantee Corporation (DICGC), which is constituted under the DICGC Act, 1961 is wholly­owned by the RBI.
2. The deposit insurance extended by DICGC covers all commercial banks including local area banks (LABs), payments banks (PBs), small finance banks (SFBs), regional rural banks (RRBs) and co­operative banks, that are licensed by the Reserve Bank.
3. As on March 31, 2023, the number of registered insured banks was about 2,027, which include 140 commercial banks (including 43 RRBs, two LABs, six PBs and 12 SFBs) and 1,887 co­operative banks [33 state cooperative banks, 352 district central cooperative banks and 1,502 urban cooperative banks (UCBs)].

4. Key Facts

• The number of fully protected accounts (294.5 crore) in FY23 constituted 98.1% of the total number of accounts (300.1 crore).
• In terms of amount, the total insured deposits of Rs 83,89,470 crore in FY23, constituted a Rs 46.3% of assessable deposits of Rs 1,81,14,550 crore.
• During FY23, the DICGC has sanctioned supplementary claims of 11 liquidated banks aggregating Rs105.8 crore under Section 16 (1) of the DICGC Act, 1961.
• In FY23, it has also settled claims of 28 banks under ‘All Inclusive Directions (AIDs)’of the RBI aggregating Rs 646.8 crore.
• The size of the Deposit Insurance Fund (DIF) stood at Rs1,69,263 crore (Provisional) as on March 31, 2023, yielding a reserve ratio (DIF/insured deposit) of 2.02%.

5. An insured bank is required to submit its claim within 45 days of imposition of AID after which the DICGC would get the claims verified within 30 days and pay the depositors within the next 15 days.

f). Lending rates are back to pre­covid levels

1. Banks’ deposit and lending rates increased in FY23 along with a 2.5% points increased in the policy repo rate.
2. In response to increase in the policy repo rate in FY23, banks raised their external benchmark­based lending rate (EBLR).
3. The 1­year median marginal cost of funds­based lending rate (MCLR) of banks also increased by 1.5% points in FY23.

g). Bank’s Fraud Analysis

1. In FY23, as per the assessment of bank group­wise fraud cases over the last three years private sector banks reported the maximum number of frauds, whereas the public sector banks continued to contribute maximum to the fraud amount.
2. 13,530 cases of bank frauds are identified in 2022­23 involving an amount of Rs 30,252 crore compared to 9,097 frauds amounting Rs 59,819 crore in 2021 22. The report highlighted that proportionately, the decline in the total amount involved in frauds continued during 2022­23, with a reduction of 49 per cent over 2021­22.
3. Frauds on advances, which includes wilful loan defaults have decreased in the last two years from Rs 1.3 lakh crore to Rs 28,792 crore in 2022­23. Close to 70% of the amount involved in total bank frauds were in public sector banks.
4. In terms of Numbers, frauds have occurred predominantly in the category of digital payments (card/internet).
5. In terms of of value, frauds have been reported primarily in the loan portfolio (advances category).

h). Rise in RBI’s total income in 2022­23 by 47.06%

1. In FY23, the Reserve Bank of India (RBI) witnessed an increase in the size of its balance sheet by Rs 1,54,453.97 crore, which is equivalent to a growth of 2.50%. The balance sheet expanded from Rs 61,90,302.27 crore in FY22 to Rs 63,44,756.24 crore in FY23.
2. The RBI’s income showed a significant rise of 47.06% to reach Rs 2.35 lakh crore in FY23, while the expenditure increased by 14.05% to reach Rs 1.48 lakh crore.
3. The overall surplus for FY23 amounted to Rs 87,416.22 crore, indicating a substantial increase of 188.43% compared to the surplus of Rs 30,307.45 crore in FY22. In previous years, the surplus stood at approximately Rs 99,122 crore in FY21, Rs 57,127.53 crore in FY20, and Rs 1,75,987.73 crore in FY19.
4. The supply of banknotes during FY23 totaled 2,26,002 lakh pieces, reflecting a 1.57% increase from FY22 (2,22,505 lakh pieces). However, the expenditure on printing banknotes decreased from Rs 4,984.80 crore in FY22 to Rs 4,682.80 crore in FY23.

RBI’s Income, Expenditure, and Surplus Statement in FY23

RBI’s Income, Expenditure, and Surplus	FY22 (Amount in Rs crore)	FY23 (Amount in Rs crore)
Income (increased by 47.06%)	1,60,112.13	2,35,457.26
Expenditure (increased by 14.05%)	1,29,800.68	1,48,037.04
Surplus payable to the Central Government (increased by 188.43%)	30,307.45	87,416.22

Other Key takeaways from the RBI’s Report

GDP Growth Forecast	The Reserve Bank of India (RBI) has projected India’s real GDP growth for FY24 to be 6.5%, which aligns with its previous forecasts. Despite challenges arising from the global economic outlook, India enjoys favorable macroeconomic conditions, promising financial circumstances, and anticipated benefits from previous reforms. These factors place India in a favorable position.
Moderate Inflation Risks	Inflation has decreased due to adjustments in global commodity and food prices. The Reserve Bank of India (RBI) has implemented monetary policy measures, including a total increase of 250 basis points in the key repo rate, to support the disinflationary process. With a stable exchange rate and a normal monsoon, it is anticipated that headline inflation will decline to 5.2% from the average of 6.7% recorded last year.
Consumer Confidence Growth	According to the consumer confidence survey conducted by the Reserve Bank of India (RBI), consumers have a positive perception of the current economic situation and household income. Furthermore, future expectations are optimistic, indicating that households are likely to increase their expenditure on non-essential items. The growing credit growth, particularly in housing and personal loans, is indicative of a stable domestic household demand.
Monsoon and El Nino Factor	The success of the kharif crop is contingent upon the progress of rainfall during the South-West Monsoon (SWM). According to the Indian Meteorological Department, the forecast predicts normal SWM rainfall, expected to be around 96% (+/- 4%) of the long period average. However, the actual outcome of the SWM rains will be influenced by various factors, including the possibility of rainfall deficiency caused by an El Nino event, as well as compensatory effects like the positive Indian Ocean Dipole.
Capex and Private Investment	The consistent rise in the government’s capital expenditure is projected to encourage greater private investment in the fiscal year 2023-24. The Union Budget for 2023-24 has witnessed a significant increase of 37.4% in the allocated capital expenditure, with notable allocations for railways and interest-free loans to states for capital expenditure purposes. Measures such as the production-linked incentive (PLI) scheme and initiatives aimed at improving logistics efficiencies are expected to provide a boost to the growth momentum.
Resilient Banking Sector	Despite the recent turbulence in the global financial sector, the domestic banking sector in India has demonstrated resilience. Nevertheless, the Reserve Bank of India (RBI) highlights the importance of evaluating risks to financial stability and enhancing the robustness of financial institutions, particularly in the face of tightening monetary policy. It is crucial to consistently review and reinforce capital buffers and liquidity positions. In the fiscal year 2023-24, the RBI intends to introduce policy measures, including guidelines on expected loss-based provisioning, to further strengthen the financial system.

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