Report of the Central Board of Directors on the working of the Reserve Bank of India for the year ended June 30, 2020, submitted to the Central Government in terms of Section 53(2) of the Reserve Bank of India Act, 1934.
The Governor, Reserve Bank of India submits the following documents to The Finance Secretary, MoF, GOI –
A copy of annual accounts for the year ended June 30, 2020, certified by the Bank’s Auditors and signed by the Governor, Deputy Governors & Chief General Manager In-charge.
Two copies of the annual report of the Central Board on the working of the Bank during the year ended June 30, 2020.
From Q2:2019-20, the fiscal policy stance became expansionary, with a momentous corporate tax regime change that made India comparable with Asian peers. This fiscal impulse, together with the cyclically induced shortfall in revenues, eventually produced a sizeable deviation in the central government’s gross fiscal deficit (GFD) from the target for the year – 4.6 percent of GDP as against 3.3 percent budgeted – warranting the usage of the escape clause under the revised Fiscal Responsibility and Budget Management (FRBM) Act.
During the year, several initiatives were undertaken to develop various segments of the financial market spectrum that are under the jurisdiction of the Reserve Bank.
In the foreign exchange market, the focus turned to incentivise access, bridging the segmentation between onshore and offshore activity, simplifying the hedging regime within an overall rationalisation of regulations, and enhancing the ease of doing business in a principles-based regulatory framework.
In the debt market, specified securities issued by the Government of India were opened to non-residents under the fully accessible route (FAR), among other initiatives to liberalise foreign portfolio investments.
The market borrowing programmes of the central and state governments were conducted in alignment with the objectives of minimising cost and mitigation of risks.
The development of the debt market was carried forward through liquidity enhancement, expanding the investor base and improving debt management strategies.
In the money market, a revised liquidity management framework was put in place to empower the Reserve Bank to actively manage liquidity conditions with the use of conventional and unconventional instruments. Notably, longer term repo operations and special open market operations (OMOs), on top of currency swaps that were launched in 2018-19, were added to the Reserve Bank’s arsenal of liquidity management tools.
Past efforts for resolution of stressed assets seemed to start showing results: after reaching a peak of 11.5 per cent at end-March 2018, a decline in the gross non-performing assets (GNPA) ratio of scheduled commercial banks (SCBs) set in, taking it down to 8.5 per cent by end-March 2020. The provision coverage ratio of SCBs improved significantly for the third consecutive year to reach 65.4 per cent in March 2020.
The capital to risk-weighted assets ratio (CRAR) of SCBs improved to 14.8 percent in March 2020 (14.3 percent a year ago)
Initiatives were taken to strengthen the regulatory and supervisory framework of the cooperative banking sector through review of trigger-based supervisory action, constitution of boards of management for urban cooperative banks (UCBs) with deposits of Rs.100 crore or above, rationalisation of exposure norms for single and group borrowers of UCBs and amalgamation of district central cooperative banks in Kerala and development of Central Fraud Registry (CFR) for UCBs