RESERVE BANK OF INDIA ANNUAL REPORT 2012-13

222 Pages·6.236 MB·English

by  Reserve Bank of India

Report of the Central Board of Directors on the working of the Reserve Bank of India
for the year ended June 30, 2013 submitted to the Central Government in terms of
Section 53(2) of the Reserve Bank of India Act, 1934
RESERVE BANK OF INDIA ANNUAL REPORT
2012-13

CENTRAL BOARD / LOCAL BOARDS
GOVERNOR
D. Subbarao
DEPUTY GOVERNORS MEMBERS OF LOCAL BOARDS
K. C. Chakrabarty
Anand Sinha
H. R. Khan WESTERN AREA
Urjit R. Patel Kiran Karnik
K. Venkatesan
DIRECTORS NOMINATED UNDER
Dattaraj V. Salgaocar
SECTION 8 (1) (b) OF THE RBI ACT, 1934
Jayantilal B. Patel
Anil Kakodkar
Kiran S. Karnik
M. V. Rajeev Gowda EASTERN AREA
Nachiket M. Mor Nachiket M. Mor
Ms Anila Kumari
DIRECTORS NOMINATED UNDER Sharif Uz-zaman Laskar
SECTION 8 (1) (c) OF THE RBI ACT, 1934
Y. H. Malegam
NORTHERN AREA
Azim Premji
Anil Kakodkar
Dipankar Gupta
G. M. Rao Ram Nath
Ela Bhatt Kamal Kishore Gupta
Indira Rajaraman
Mihir Kumar Moitra
Y.C. Deveshwar
A. Naveen Bhandary
Damodar Acharya
SOUTHERN AREA
DIRECTOR NOMINATED UNDER
SECTION 8 (1) (d) OF THE RBI ACT, 1934 M.V.Rajeev Gowda
Arvind Mayaram K. Selvaraj
Rajiv Takru Kiran Pandurang
As on August 8, 2013
PRINCIPAL OFFICERS
(As on August 8, 2013)
EXECUTIVE DIRECTORS ....................................................................... G. Gopalakrishna
....................................................................... Deepak Mohanty
....................................................................... S. Karuppasamy
....................................................................... R. Gandhi
....................................................................... P. Vijaya Bhaskar
....................................................................... B. Mahapatra
....................................................................... G. Padmanabhan
....................................................................... Jasbir Singh
....................................................................... Deepali Pant Joshi
CENTRAL OFFICE
Central Vigilance Cell ................................................................................ Kaza Sudhakar, Chief Vigilance Offi cer
Customer Service Department .................................................................. Supriya Pattnaik, Chief General Manager
Department of Banking Operations and Development .............................. Chandan Sinha, Principal Chief General Manager
Department of Banking Supervision .......................................................... G. Jaganmohan Rao, Principal Chief General Manager
Department of Communication .................................................................. Alpana I. Killawala, Principal Press Relation Offi cer
Department of Currency Management ...................................................... B.P. Vijayendra, Principal Chief General Manager
Department of Economic and Policy Research ......................................... B.M. Misra, Offi cer-in-Charge
Department of Expenditure and Budgetary Control .................................. S. Ganesh, Principal Chief General Manager
Department of External Investments and Operations................................ M. Sarkar Deb, Chief General Manager
Department of Government and Bank Accounts ....................................... S. Ganeshkumar, Chief General Manager-in-Charge
Department of Information Technology ...................................................... A.S. Ramasastri, Chief General Manager-in-Charge
Department of Non-Banking Supervision .................................................. N. S. Vishwanathan, Principal Chief General Manager
Department of Payment and Settlement Systems ..................................... Vijay Chugh, Chief General Manager
Department of Statistics and Information Management ............................ A.B. Chakraborty, Offi cer-in-Charge
Financial Markets Department .................................................................. G. Mahalingam, Principal Chief General Manager
Financial Stability Unit .............................................................................. R.G. Warriar, Chief General Manager
Foreign Exchange Department.................................................................. R.N. Kar, Chief General Manager
Human Resource Management Department ............................................ U. S. Paliwal, Principal Chief General Manager
Inspection Department .............................................................................. M. Sebastian, Principal Chief General Manager
Internal Debt Management Department .................................................... K.K. Vohra , Principal Chief General Manager
Legal Department ...................................................................................... G.S. Hegde, Principal Legal Adviser
Monetary Policy Department ..................................................................... M. D. Patra, Principal Adviser
Premises Department ................................................................................ K.R. Ananda, Principal Chief General Manager
Rajbhasha Department ............................................................................. Ramakant Gupta, General Manager
Risk Monitoring Department ...................................................................... M. Rajeshwar Rao, Chief General Manager
Rural Planning and Credit Department ..................................................... A. Udgata, Principal Chief General Manager
Secretary’s Department ............................................................................. Bazil Shaikh, Principal Chief General Manager & Secretary
Urban Banks Department .......................................................................... A. K. Bera, Principal Chief General Manager
COLLEGES PRINCIPALS
College of Agricultural Banking, Pune ....................................................... Meena Hemchandra
Reserve Bank Staff College, Chennai ....................................................... Uma Subramaniam
OFFICES REGIONAL DIRECTORS
Chennai ..................................................................................................... J. Sadakkadulla
Kolkata ....................................................................................................... B.P. Kanungo
Mumbai ...................................................................................................... J.B. Bhoria
New Delhi .................................................................................................. Deepak Singhal
BRANCHES
Ahmedabad ............................................................................................... Sudarshan Sen
Bangalore .................................................................................................. Uma Shankar
Bhopal ....................................................................................................... P.R. Ravi Mohan
Bhubaneswar ............................................................................................. P. K. Jena
Chandigarh ................................................................................................ M. K. Singh
Guwahati ................................................................................................... Pradyumna K. Jena
Hyderabad ................................................................................................. K.R. Das
Jaipur ......................................................................................................... Sathyan David
Jammu ....................................................................................................... K.K. Saraf
Kanpur ....................................................................................................... Shekhar Bhatnagar
Lucknow .................................................................................................... Arun Pasricha
Nagpur ....................................................................................................... Phulan Kumar
Patna ......................................................................................................... M.K. Verma
Thiruvananthapuram ................................................................................. Salim Gangadharan
OFFICERS-IN-CHARGE
Agartala ..................................................................................................... A.K. Pandey, General Manager
Belapur ...................................................................................................... Ajay Michyari, General Manager
Dehradun ................................................................................................... R.L. Sharma, General Manager
Gangtok ..................................................................................................... E.E. Karthak, General Manager
Kochi .......................................................................................................... C.V. George, General Manager
Panaji ......................................................................................................... Jaikish, General Manager
Raipur ........................................................................................................ Nirmal Chand, General Manager
Ranchi ....................................................................................................... Saurav Sinha, General Manager
Shillong ...................................................................................................... P. Shyam Sunder, Chief General Manager
Shimla ........................................................................................................ I. S. Negi, General Manager
Srinagar ..................................................................................................... Ramesh Chand, Deputy General Manager
CONTENTS
Page No.
PART ONE : THE ECONOMY: REVIEW AND PROSPECTS
I. ASSESSMENT AND PROSPECTS ............................................................................... 1
Assessment of 2012-13 ................................................................................................. 3
Prospects for 2013-14 .................................................................................................... 6
II. ECONOMIC REVIEW ..................................................................................................... 13
The Real Economy ......................................................................................................... 13
Price Situation ................................................................................................................ 26
Money and Credit ........................................................................................................... 38
Financial Markets ........................................................................................................... 43
Government Finances .................................................................................................... 54
External Sector ............................................................................................................... 59
PART TWO: THE WORKING AND OPERATIONS OF THE RESERVE BANK OF INDIA
III. MONETARY POLICY OPERATIONS ............................................................................. 67
Monetary Policy Operations: Context and Rationale ...................................................... 67
IV. CREDIT DELIVERY AND FINANCIAL INCLUSION ..................................................... 75
Credit Delivery ................................................................................................................ 75
Financial Inclusion .......................................................................................................... 79
Financial Literacy Activities ............................................................................................ 82
V. DEVELOPMENT AND REGULATION OF FINANCIAL MARKETS .............................. 84
Government Securities Market ....................................................................................... 84
Foreign Exchange Market............................................................................................... 86
Derivatives Market .......................................................................................................... 92
VI. REGULATION, SUPERVISION AND FINANCIAL STABILITY ..................................... 93
Financial Stability Assessment ....................................................................................... 93
Assessment of the Banking Sector ................................................................................. 95
Major Decisions Taken by Board for Financial Supervision ............................................ 97
Commercial Banks ......................................................................................................... 97
Customer Service ........................................................................................................... 104
Banking Codes and Standards Board of India ............................................................... 105
Urban Co-operative Banks ............................................................................................. 105
Rural Co-operatives ........................................................................................................ 109
Deposit Insurance and Credit Guarantee Corporation ................................................... 110
Non-Banking Financial Companies ................................................................................ 110
i
CONTENTS
Page No.
VII. PUBLIC DEBT MANAGEMENT .................................................................................... 116
Debt Management of Central Government ..................................................................... 116
Debt Management of State Governments ...................................................................... 119
VIII. CURRENCY MANAGEMENT ........................................................................................ 122
Banknotes in Circulation ................................................................................................. 122
Coins in Circulation ......................................................................................................... 122
Currency Operations ...................................................................................................... 123
Clean Note Policy ........................................................................................................... 124
Counterfeit Banknotes .................................................................................................... 125
Expenditure on Security Printing and Distribution .......................................................... 126
The way forward ............................................................................................................. 126
IX. PAYMENT AND SETTLEMENT SYSTEMS AND
INFORMATION TECHNOLOGY..................................................................................... 128
Trends in Payment Systems .......................................................................................... 129
Policy Initiatives ............................................................................................................. 130
Information Technology Initiatives for the Banking System ............................................. 135
Information Technology within Reserve Bank ................................................................. 138
X. GOVERNANCE, HUMAN RESOURCES DEVELOPMENT AND
ORGANISATIONAL MANAGEMENT ............................................................................ 140
Initiatives for Improved Governance ............................................................................... 140
Initiatives for Improved Communication .......................................................................... 142
Human Resource Development Initiatives ...................................................................... 145
Initiatives in Organisation Management.......................................................................... 148
XI. THE RESERVE BANK’S ACCOUNTS FOR 2012-13 .................................................... 153
Balance Sheet ................................................................................................................ 155
Income ............................................................................................................................ 163
Expenditure .................................................................................................................... 165
Statement of Signifi cant Accounting Policies and Notes to the Accounts forming
part of the Financial Statements for the year ended June 30, 2013 ............................... 170
Annex I : List of Speeches by Governor and Deputy Governors:
April 2012 to July 2013........................................................................................... 175
Annex II : Visits of Foreign Delegations to the Reserve Bank of India during
July 2012 to June 2013 .......................................................................................... 178
ii
CONTENTS
Page No.
INDEX OF APPENDIX TABLES
1. Macroeconomic and Financial Indicators ....................................................................... 179
2. Growth Rates and Sectoral Composition of Real Gross Domestic Product .................. 182
3. Gross Domestic Saving and Investment ......................................................................... 183
4. Financial Saving of the Household Sector (Gross) ......................................................... 184
5. Agricultural Production ................................................................................................... 185
6. Procurement, Off-Take and Stocks of Foodgrains .......................................................... 186
7. Trends in Index of Industrial Production ......................................................................... 187
8. Variations in Index Numbers of Wholesale Prices .......................................................... 188
9. Variations in Reserve Money .......................................................................................... 189
10. Variations In Money Stock .............................................................................................. 190
11. Sectoral Deployment of Gross Bank Credit .................................................................... 191
12. Capital Market - Primary and Secondary ....................................................................... 192
13. Turnover in Indian Derivatives Market ............................................................................ 193
14. Indices of Real Effective Exchange Rate (Reer) and
Nominal Effective Exchange Rate (Neer) of the Indian Rupee ....................................... 194
15. Key Fiscal Indicators ....................................................................................................... 195
16. Budgetary Operations of the State Governments ........................................................... 196
17. India’s Exports and Imports ............................................................................................ 197
18. India’s Overall Balance of Payments .............................................................................. 198
19. Foreign Direct Investment Flows to India: Country-Wise and Industry-wise................... 199
20. India’s Foreign Exchange Reserves ............................................................................... 200
21. India’s External Debt ...................................................................................................... 201
BOXES
II.1 Industrial Slowdown: Causes and Remedies ................................................................. 19
II.2 Indian Coal Sector: Issues & Strategies ......................................................................... 23
II.3 Pricing Power and Infl ation ............................................................................................. 31
II.4 Core Infl ation: Alternate Methodologies ......................................................................... 32
II.5 Producer Price Index: The Concept and Measurement .................................................. 33
II.6 Role of Forward-looking Surveys in Monetary Policy Formulation ................................. 41
II.7 Unconventional Monetary Policy by Central Banks in Developed Economies:
Impact on Financial Markets ........................................................................................... 44
II.8 Relationship between Exchange Rate Volatility and Futures Trading in India ................ 52
II.9 Non Deliverable Forward Market and Onshore INR Market:
Evidence on Inter-linkages ............................................................................................. 53
iii
CONTENTS
Page No.
II.10 Cyclicality of Fiscal Policy: The Indian Experience ......................................................... 55
II.11 Recommendations of the Working Group to Study Issues relating to
Gold Imports and Gold Loan NBFCs in India ................................................................. 61
III.1 Sensitivity of Investment and Growth to Change in Real Interest Rate .......................... 72
III.2 Measurement of Infl ation Expectations .......................................................................... 74
IV.1 Recommendations of Expert Committee to examine the Three-Tier
Short-Term Rural Co-operative Credit Structure (STCCS) ............................................. 79
IV.2 Guidelines on Basic Savings Bank Deposit Accounts for Financial Inclusion ................ 81
V.1 Buyback/ Switches for Liability Management ................................................................. 85
VI.1 India: Financial Sector Stability Assessment .................................................................. 94
VI.2 Impact of NPAs on profi tability of banks ......................................................................... 96
VI.3 Review of prudential guidelines on restructuring of advances by banks and
fi nancial institutions – Major recommendations of the Working Group ........................... 100
VI.4 Licensing of new banks in private sector ........................................................................ 103
VI.5 Deposit Insurance in the Financial System – Some Observations ................................. 111
VI.6 NBFC-Factors ................................................................................................................. 112
VI.7 Legal developments in the banking sector ..................................................................... 113
VI.8 Major recommendations of the Financial Sector Legislative Reform Commission ......... 115
VII.1 Issuance of Infl ation Indexed Bonds ............................................................................... 118
VIII.1 Plastic Banknotes ........................................................................................................... 123
IX.1 Vision Document 2012-15 .............................................................................................. 130
IX.2 Technical Committee to Examine Uniform Routing Code and
Account Number Structure ............................................................................................. 131
IX.3 Committee to Recommend Implementation of GIRO-based payment
systems in India .............................................................................................................. 134
IX.4 Cloud Computing - Trends, Issues and Concerns .......................................................... 136
X.1 RBIQ ............................................................................................................................... 146
X.2 Shashi Rajagopalan Memorial Awards ........................................................................... 147
X.3 Code of Ethics and Governance ..................................................................................... 150
XI.1 Technical Committee to review the form of presentation of the
Balance Sheet and Profi t & Loss Account ...................................................................... 154
CHARTS
II.1 Real GDP Growth ........................................................................................................... 13
II.2 Expenditure Side of GDP ............................................................................................... 14
II.3 Rate of Saving and Investment ....................................................................................... 15
iv