The year 2020-21 is significant for the change in the accounting year of the Reserve Bank to April – March from July- June earlier. As a result, the accounting year 2020-21 was of nine months from July 2020 – March 2021.
Two major factors have contributed to a higher surplus for the central bank even as interest income dipped 37 per cent during the year. Besides, the profits from bond and currency trading, employee costs too fell sharply. The Profit on Sale and Redemption of rupee securities increased 314 per cent to Rs 5,193.94 crore during the period on account of higher sale operations. Profit from sale of foreign currency amounted to Rs 50,629 crore up 69 per cent. Non-interest income which also includes profits from other activities rose 9 per cent to Rs 64,215 crore.
The total employee cost for the year decreased by 46.37 per cent to Rs 4,788.03 crore in 2020-21 mainly due to the net impact of decrease in Reserve Bank’s expenditure towards accrued liabilities of various superannuation funds in 2020-21 and also the current accounting period being of nine months. A provision of Rs 20,710.12 crore was made and transferred to Contingency Fund (CF). No provision was made towards Asset Development Fund, RBI said
The department of external investment operations which manages the country’s foreign exchange reserves has in its agenda for 2021-22 to continue to explore new asset classes, new jurisdictions markets for deployment of foreign currency assets for portfolio diversification and in the process tap advice from external experts, if required, the annual report said.
Research indicates that the structural low yield environment is expected to persist for a considerable time in the future. Reserve managers, therefore, face the challenge of looking beyond the traditional approaches for the management of reserves to maintain and augment returns. Subject to safety, they can also explore increasing the duration of their portfolios, adopting asset diversification by investing in new asset classes, new currencies and markets, relaxation of credit quality requirements, and active management of their gold stocks.