MUMBAI: Reserve Bank of India (RBI) appears to have had an inkling of the volatility in the foreign exchange markets that was to follow later during the year. In its balance sheet for the year 2012-13, RBI has increased the size of the war chest that it has built up for times of volatility in the financial markets.
From the surplus that it generates through open market operations and interventions in the foreign exchange market, RBI pays out a dividend to the government after setting aside funds for its contingency reserve (CR) and asset development reserve. The CR represents the amount set aside on a year-to-year basis for meeting unexpected and unforeseen contingencies, including depreciation in the value of securities, and risks arising out of monetary/exchange rate policy operations. The CR increased by Rs 26,247 crore (13.4%) from Rs 1,95,405 crore as on June 30, 2012, to Rs 2,21,652 crore on June 30, 2013.
Besides the CR, RBI has another reserve to meet the needs of internal capital expenditure and make investments in subsidiaries and associate institutions which is termed as the asset development reserve. In 2012-13, Rs 2,547 crore was transferred from income to ADR raising its level to Rs 20,761 crore as on June 30, 2013. The combined CR and ADR together amounts to 10.1% of the RBI's assets as against 9.7% of its assets in 2011-12. However, it is still short of the 12% recommended by an internal panel.
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