23 July 2020
E
CO
S
COPE
The Economy Observer
A Primer on RBI’s Balance Sheet
Expounding its divergence vis-à-vis money supply measures
The Reserve Bank of India (RBI) has injected large liquidity into the financial system during the past five months through
various measures. It has cut policy interest rates, (temporarily) reduced the cash reserve ratio (CRR) and announced
long-term refinance operations (LTROs) – targeted or not. Consequently, the banking system’s net surplus has increased
from INR3t (or 2.2% of NDTL) in early 2020s to INR4.3t (or ~3% of NDTL) currently. In this note, we discuss the impact of
these liquidity-enhancing measures on the RBI’s balance sheet and money supply.
Since mid-Feb’20 (when the first LTRO was conducted), the RBI’s balance sheet has increased by about INR9.5t to
th
INR54t as at 10 Jul’20. This has led the annual growth rate to more than double – from 14% in early 2020 to >30%
currently. Almost half of the expansion in the RBI’s balance sheet is attributed to foreign currency assets (including gold
coins and bullion), another 30% by LTROs and the remaining 20% by purchase of domestic securities.
However, it is interesting to note that for the second time in the past two decades, the RBI’s balance sheet has diverged
substantially from the reserve money (or the ‘M0’), which has increased by INR2t since mid-Feb’20 (~14% YoY) – only
about a fifth of the former. Although this may seem perplexing, an understanding of the components of the RBI’s
balance sheet and M0 helps explain this spurious puzzle.
Further, the annual growth in broad money supply (or the ‘M3’) also picked up to 12.4% YoY – the highest in the past six
years – supported almost entirely by the high fiscal deficit. Still, we do not believe it to be inflationary because (a) the
credit-deposit ratio (wherein the numerator includes net credit of the RBI and the banking sector to the government
and the private/commercial sector) is currently at ~111%, similar to the levels in the past two years, and (b) the
government has resisted massive fiscal stimulus, which implies that unless commercial lending picks up quickly (which
is not our base case), broad money supply will taper off in coming months.
Finally, while it is hoped that the RBI will intervene in the treasury market to support bond yields, it is an extremely
difficult task to accomplish, especially if foreign capital inflows remain strong.
RBI’s balance sheet has expanded massively in 2020…:
Since mid-Feb’20 – when
the RBI announced its first LTRO – its balance sheet has expanded by record INR9.5t
up to the week ended 10
th
Jul’20. This surge in the past five months is higher than
the cumulative rise in the RBI’s balance sheet during the previous two years
(Exhibit
1).
It has grown at an annual rate of 30% during the past four months, marking the
highest growth since the pre-GFC period in 2007-08
(Exhibit 2).
Exhibit 1:
RBI’s balance sheet has increased by INR9.5t since
the first LTRO was conducted in mid-Feb’20…
Change in RBI's balance sheet
Exhibit 2:
…and has grown at an average of ~30% in the past
four months
70
50
30
10
(10)
(30)
(50)
RBI balance sheet
12,000
10,000
8,000
6,000
4,000
2,000
0
(2,000)
(4,000)
(INR b)
(% YoY)
* FY20 is up to mid-Feb’20/FY21 starts from mid-Feb’20
Source: RBI, CEIC, MOFSL
Nikhil Gupta – Research Analyst
(Nikhil.Gupta@MotilalOswal.com)
Yaswi Agarwal
– Research Analyst
(Yaswi.Agarwal@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Almost four-fifth of the
increase in the RBI’s
balance sheet is on account
of foreign currency assets
and LTROs, while the
remaining 20% was
explained by the RBI’s
purchases of government
securities.
…led primarily by foreign currency assets and LTROs:
Speaking in the simplest form,
there are only three ways in which a central bank can expand its balance sheet – by
buying government securities (investments), by injecting liquidity into the domestic
financial system (loans and advances) and by buying foreign currency assets,
including gold. An analysis of the factors responsible for the expansion in the RBI’s
balance sheet confirms that almost half of the expansion is due to the rise in foreign
currency assets, led by surge in foreign capital inflows and also revaluation gains (led
by INR depreciation, higher gold prices and bond yields). Another 30% was
contributed to the RBI’s balance sheet by the various LTROs – targeted or not –
implemented between Feb’20 and Apr’20, and the special facilities to All-India
Financial institutions (such as NABARD, etc.), which injected liquidity totaling to
INR2.7t. Almost four-fifth of the increase, thus, is on account of these two factors,
while the remaining fifth was explained by the RBI’s purchases of government
securities
(Exhibit 3).
Exhibit 4:
…and expansion in liabilities is almost equally
distributed between the three components
RBI's Total Liabilities (INR trillion)
Total Assets
15
10
5
0
(5)
Notes in circulation
Deposits
Others
Total liabilities
Exhibit 3:
Foreign capital inflows account for half of the
expansion in RBI’s balance sheet…
RBI's Total Assets (INR trillion)
FX assets @
15
10
5
0
(5)
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20^ FY21*
@ Including gold coins & bullions
* Since mid-Feb’20
INR securities
Loans & advances
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20^ FY21*
Source: RBI, CEIC, MOFLS
^ Up to mid-Feb’20
On the liabilities side, the
expansion was almost
equally distributed between
currency in circulation,
deposits and others.
On the liabilities side, the expansion was almost equally distributed between
currency in circulation, deposits and others
(Exhibit 4).
‘Deposits’ refer to the
accounts held by the banking sector and the governments (central and states) with
the RBI. All the statutory reserves to be held by the banking sector are included
under deposits. As the RBI cut CRR in Mar’20, the reserve balances declined;
however, with the RBI injecting INR2.5t through LTROs, banks’ total deposits with
the RBI actually rose.
Further, as the INR weakened ~5% against the USD during the past few months, gold
prices have surged and domestic bond yields have declined. Due to this, the RBI has
recorded handsome gains on the revaluation account, which comes under ‘Other
liabilities’, also called non-monetary liabilities.
An item-wise description of the RBI’s balance sheet is provided in
Appendix#1
(at
the end of the report, Pages 7-9), which details every single component on the
assets and liabilities side and is also likely help readers understand the treatment of
every transaction.
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This is the second time in
the past two decades, when
the RBI’s balance sheet and
M0 have shown a large
difference.
What explains the divergence between RBI’s balance sheet and M0:
According to
the standard textbook, a central bank’s balance sheet is broadly equivalent to the
reserve money (or M0); however, there are times when the movement between the
two could be very different. Although the RBI’s balance sheet has expanded by
INR9.5t during the past five months, M0 has increased by about INR2t – only a fifth
of the former. In fact, this is the second time in the past two decades, when the
RBI’s balance sheet and M0 have shown a large difference. Although the RBI’s
balance sheet is growing ~30% YoY, M0 is growing only at about ~14%
(Exhibits 5-6).
There are two key factors, which explain these divergences – the adjustments on
account of the RBI’s net balances with the commercial sector (or banking system in
particular) and the revaluation account.
Exhibit 6:
…marking the second episode of such diverse
trends in the two variables since 1999
600
500
400
300
200
RBI Balance sheet
(Jan'08=100)
Reserve money/M0
Exhibit 5:
Reserve money/M0 has grown much slowly
compared to RBI’s balance sheet…
80
60
40
20
0
RBI Balance sheet
(% YoY)
Reserve money/M0
(20)
(40)
100
0
Last data is for the week ending 10 Jul’20
th
Source: RBI, CEIC, MOFLS
There are two key factors,
which explain these
divergences – the
adjustments on account of
the RBI’s net balances with
the commercial sector and
the revaluation account.
Reserve money reflects the efficacy of RBI’s monetary policy:
Exhibit 7
showcases
how M0 is derived from the RBI’s balance sheet. In particular, M0 looks at the
net
RBI credit to the government,
net
RBI credit to the commercial sector and also
adjusts for the revaluation gains, which are separately recorded in the RBI’s balance
sheet. Although the RBI balance sheet has expanded due to LTROs, the reserve
money supply has actually reduced because the banking system is in large surplus
on net basis (repo – reverse repo transactions). Similarly, while the revaluation gains
have led to expansion in the RBI’s assets and liabilities, they are deducted from M0.
Exhibit 7:
Reserve money is a re-classification of RBI’s balance sheet
Stylized RBI’s balance sheet
Liabilities
Assets
1. Currency in circulation
1. Foreign currency assets
2. Banks’ reserves
2. Gold coils & bullions
3. Government deposits
3. Rupee securities (including T-bills)
4. Other deposits
4. Loans & advances
5. Non-monetary liabilities
Stylized accounts of Reserve Money (M0)
Sources
Uses
1. Currency in circulation
1. Net foreign exchange assets
2. Banks’ reserves
2. Net credit to the government
3. Net credit to the commercial sector
4.
Less:
Net non-monetary liabilities
Source: RBI, MOFSL
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Now, let’s look at the factors that explain the divergence between M0 and the RBI’s
balance sheet in 2020. As discussed above, although the RBI’s balance sheet
expanded by INR2.7t on account of LTROs, net surplus of the banking system
increased in recent months. Therefore, despite providing liquidity to the banking
system, RBI’s
net
credit to the commercial sector has fallen.
While net foreign exchange
reserves have risen by
INR4.7t, the revaluation
gains accounted for almost
three-fourth of those gains.
Similarly, while net foreign exchange reserves have risen by INR4.7t, the revaluation
gains (included in the non-monetary liabilities) accounted for almost three-fourth of
those gains. After adjusting for non-monetary liabilities, net forex reserves have
risen by INR1.3t since mid-Feb’20 (please note that revaluation gains also include
the impact of lower bond yield, affecting INR securities rather than forex assets. For
simplicity purpose, we have ignored these nuances).
Apart from these two key factors, although the RBI’s holding of INR securities
(including T-bills) have increased by INR1.9t since mid-Feb’20, the central bank’s net
credit to the government (center and states) has actually increased by only INR1.3t.
In total, these three factors explain why M0 has increased by only a fifth of the
expansion in the RBI’s balance sheet since mid-Feb’20
(Exhibit 8)
.
Exhibit 8:
Notwithstanding LTROs, RBI’s credit to the
commercial sector has declined in FY21*…
Uses of M0/RM (INR trillion)
RBI Credit to Govt RBI Credit to Banks Net FX assets@
10
M0
Exhibit 9:
…and currency in circulation has made up for the
reduction in CRR
Sources of M0/RM (INR trillion)
Currency in Circulation
Bankers' Deposits
6
4
2
M0
5
0
(5)
(10)
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20^ FY21*
@ adjusted for net non-monetary liabilities
^ FY20 data up to mid-Feb’20
* Since mid-Feb’20
0
(2)
(4)
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20^ FY21*
Source: RBI, CEIC, MOFSL
On the sources side, what drives reserve money is primarily currency in circulation,
which has increased INR3.3t in the past five months. However, since the RBI cut CRR
for a year by 1pp, lower bankers’ required reserves offset the increase in M0
(Exhibit
9).
The moot question then – which one should we look at – the RBI’s balance sheet or
M0? As explained above, M0 is actually derived from the RBI’s balance sheet. And
therefore, it actually doesn’t matter. Both variables serve a purpose. The RBI’s
balance sheet confirms the domestic monetary policy – how accommodative or
restrictive the Central Bank is. M0, on the other hand, reflects the efficacy of the
RBI’s policy in the real economy. While the RBI has injected liquidity worth INR2.7t
in the banking system between Feb’20 and Apr’20, the banking sector, however, has
parked bigger surpluses with the RBI, leading to lower reserve money. As the saying
goes,
“You can take the horse to the water, but cannot make it drink.”
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Broad money supply also growing at six-year highest pace…:
Although a central
bank holds the power to print currency, the money in a modern economy is created
by commercial banks. As some argue,
“Money is actually created out of thin air”
(or
by literally pressing a few strokes on a keyboard).
Like M0, the broad money
supply growth has also
been moderate at ~12% in
recent months; however, it
has now grown at the
highest pace in the past six
years.
M0, discussed above, is also called the narrow measure of money supply, which
stood at close to INR32t as at mid-Jul’20. However, the broad money supply,
measured by M3, was INR175t in early-Jul’20, more than 5x of M0. What truly
matters for the real economy is M3, which includes all the transactions between
commercial banking and the non-bank sector. Notably, the components of M3 are
similar to that of M0; nevertheless, it includes the assets and liabilities of the
banking sector as well.
Like M0, the broad money supply growth has also been moderate at ~12% in recent
months; however, it has now grown at the highest pace in the past six years
(Exhibit
10).
Interestingly, broad money supply growth has picked up across all economies
(Exhibit 10-11).
The broad money supply (M2) in the US is growing at an
unprecedented annual rate of ~25%, while the annual growth rates are at a decadal-
high in European nations and at least at a two-decade high in Japan. As we have
discussed
earlier in detail, such disproportionate growth in the US is attributed to
the large fiscal transfers to the citizens and massive quantitative easing by the Fed.
Although fiscal deficit has risen everywhere and the governments have transferred
money to the public, the extent of such unconditional transfers and the quantitative
easing has been lower in other nations, leading to slower pick-up in M3 growth.
Exhibit 10:
M3 growth is at the highest pace in six years…
30
25
20
15
10
5
0
Exhibit 11:
…and the trend is similar to that in other nations
Broad money supply (% YoY)
Broad money supply, M3 (% YoY)
30
20
10
0
(10)
(20)
EZ
Japan
UK
US
* Adjusted for net non-monetary liabilities
^ Up to July 3, 2020
Source: RBI, CEIC, MOFSL
…but we do not expect these trends to continue for long:
Is this a concern? Well,
it depends on (a) the current drivers of high M3 growth, and (b) the likely future
trajectory of M3 growth based on these drivers. Not only higher growth in broad
money supply in India is in line with other nations, but the drivers of growth are
also similar.
Since end-FY20, M3 has
increased by INR7.4t and
the net credit to the
government has risen by
INR7.3t.
Just like M0, M3 has three components – net credit to the government, net credit
to the private sector and net foreign assets (adjusted for net non-monetary
liabilities). Although net credit to the private sector accounts for almost two-thirds
of M3, with almost 30% share of the government credit, the entire pick-up in M3
23 July 2020
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since Mar’20 – from 9% to 12% currently – is on account of higher fiscal deficit (or
net credit to the government). Since end-FY20, M3 has increased by INR7.4t and
the net credit to the government has risen by INR7.3t. The net credit to the private
sector has actually declined by INR0.9t and forex assets (adjusted for non-
monetary liabilities) have increased by INR1.0t
(Exhibit 12).
Exhibit 12:
M3 growth is entirely driven by fiscal deficit…
Government
20
(INR trillion)
15
10
Private sector
Forex reserves*
Exhibit 13:
…and credit#-deposit ratio is lowest in 3 years
140
130
120
110
Credit#-Deposit ratio (%)
5
0
(5)
100
90
FY03
FY06
FY09
FY12
FY15
FY18
FY21^
# Investments in government securities and commercial loans
Source: RBI, CEIC, MOFSL
* Adjusted for net non-monetary liabilities
^ Up to July 3, 2020
We do not believe that the six-year highest growth in M3 is inflationary because (a)
the credit-deposit ratio in India (wherein the numerator includes net credit of the
RBI and the banking sector to the government and to the private sector) is
currently at ~111%, broadly similar to the levels in the past two years
(Exhibit 13),
and (b) the government has resisted massive fiscal stimulus (mostly the expansion
in FY21 fiscal deficit is on account of the natural tax shortfall, rather than spending
increase), which confirms that higher fiscal deficit is temporary and will start
narrowing as economic activity normalizes.
Going forward, while fiscal
deficit will start softening,
commercial lending may
remain stressed in the
foreseeable future, which
will help taper M3 growth.
Going forward, while fiscal deficit will start softening, commercial lending may
remain stressed in the foreseeable future, which will help taper M3 growth.
Therefore, while higher broad money supply is seen as a harbinger of higher
inflation by some sections, we believe that this is a temporary phenomenon, which
is unlikely to create higher inflation on a sustainable basis.
Finally, while it is still hoped that the RBI will intervene in the treasury market to
support bond yields, it will be an extremely difficult task to achieve, especially if
foreign capital inflows remain strong.
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APPENDIX#1: Item-wise description of the RBI’s balance sheet
Stylized version of the RBI’s balance sheet
Liabilities
1. Currency in circulation
2. Banks’ reserves
3. Other deposits
4. Other deposits
5. Non-monetary liabilities
Liabilities of Reserve Bank
1. Notes Issued:
The currency notes issued by the RBI constitutes the liabilities of the Issue Department. Total notes issued are
Assets
1. Foreign currency assets
2. Gold coins and bullion
3. Rupee securities (including T-bills)
4. Loans and advances
the sum of notes in circulation and notes held in the bank’s Banking Department.
1.1 Notes in Circulation:
The notes in circulation comprise notes issued by the Government of India (GoI) up to 1935 and by the
RBI since then, less notes held in the Banking Department i.e. notes held outside the RBI by the public, banks treasuries, etc. The
GoI INR1 notes issued since July 1940 are treated as INR coins, and hence, are not included under this head.
1.2 Notes held in the Banking Department:
Notes held in the Banking Department represent the amount of notes held in the
Banking Department of the Bank at different center’s to meet the day-to-day requirements of that Department. Notes in
circulation and notes held in the Banking Department are both liability items of the Issue Department.
2. Deposits:
These represent the cash balances maintained with the RBI by the Central and State Governments, banks, all India
financial institutions, such as EXIM Bank and NABARD, foreign central banks, international financial institutions, and the balance
in different accounts relating to the Employees’ Provident Fund, Gratuity and Superannuation Funds.
2.1 Deposits of the Central Government:
The RBI acts as a banker to the Central Government in terms of sections 20 and 21
and as banker to the State Governments by mutual agreement in terms of section 21(A) of the RBI Act. Accordingly, the Central
and State Governments maintain deposits with the Reserve Bank. It has been agreed by the Central Government, to maintain a
minimum balance of INR100m daily and INR1b as on Fridays. Whenever, the actual cash balance goes down below the minimum
level, the replenishment is made by creation of WMA and overdraft.
2.2 Market Stabilization Scheme (MSS):
MSS was introduced in Apr’04 following the Memorandum of Understanding between
the Government and the RBI, whereby the Government issues securities specifically for the purpose of sterilization of
operations. The issuances of Government paper under the MSS are undertaken to absorb INR liquidity created by capital flows
of an enduring nature. In order to neutralize the monetary and budgetary impact of this particular instrument, the proceeds
under the MSS were parked in a separate deposit account maintained by the Government with the RBI, which was used only for
the purpose of redemption and/or buyback of paper issued under the MSS.
2.3 Deposits of State Governments:
State Governments maintain accounts with the RBI to carry out business transactions. State
Governments need to maintain minimum INR400m balance every Friday. The sum of these amounts is reflected as a liability of
RBI under this head. Whenever the actual balance goes down below the minimum specified level, replenishment is made by
creation of ways and means advances.
2.4 Deposits of Scheduled Commercial Banks:
Scheduled Commercial Banks maintain balances with the RBI to meet the Cash
Reserve Ratio (CRR) requirements and as working funds to meet payment and settlement obligations. These accounts are used
to operate the remittance facility scheme, grant of financial accommodation, handling of government business, etc. Deposits in
this account do not carry any interest.
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2.5 Deposit of Scheduled State Co-operative Banks:
Scheduled State Co-operative Banks maintain certain balances with the RBI
and sum of these balances is reflected in this head.
2.6 Deposits of Other Banks:
Deposits of Other Banks include the outstanding balances in the deposit accounts of Regional
Rural Banks (RRBs), Other Scheduled Co-operative Bank, Non-SCBs, Other Cooperative Banks and Other Banks (including Central
Co-operative Banks and primary co-operative banks) that have been permitted to open accounts with the Reserve Bank.
2.7 Other Deposits:
Other deposits include deposits of foreign central banks, domestic and international financial institutions,
deposits placed by mutual funds, accumulated retirement benefits and miscellaneous deposits viz., balances of Clearing
Corporation of India Ltd, primary dealers, employee credit societies, etc. and sundry deposits. Deposits of the RBI Employees'
Provident, Gratuity, Super-annotation and Guarantee Funds, are also part of other deposits. As per change in accounting
practice with effect from 11 Jul’14, transaction under Reverse repo is now treated as part of “Other Deposit.”
3. Other Liabilities:
Other liabilities of the Reserve Bank’ include internal reserves and provisions of the Reserve Bank such as
Currency and Gold Revaluation Account (CGRA), Exchange Equalization Account (EEA), Contingency Reserve and Asset
Development Reserve. Contingency Reserve represents the amount set aside on a year-to-year basis for meeting unexpected
and unforeseen contingencies including depreciation in value of securities, exchange guarantees and risks arising out of
monetary/exchange rate policy compulsions. These liabilities are also called non-monetary liabilities of the RBI.
Currency and Gold Revaluation Account (CGRA):
Currency and Gold Revaluation Account (CGRA) is one of the important
accounts wherein unrealized gains/losses on valuation of Foreign Currency Assets (FCA) and gold due to movements in the
exchange rates and/or price of gold are not taken into the Profit & Loss Account but instead booked under this head. As CGRA
balances the changes in gold prices and the exchange rate, its balance varies with the size of asset base and volatility in the
exchange rate and price of gold. In the recent past, even though FCA and gold have declined as a percentage of total assets, the
th
CGRA has risen due to sharp depreciation of INR against the USD.
Investment Revaluation Account (IRA):
The RBI values foreign dated securities at market prices prevailing on the last business
day of each month and the appreciation/ depreciation arising from there is transferred to the IRA. The unrealized gains/losses
arising from such periodic revaluation are adjusted against the balance in the IRA.
Paid-up Capital and Reserve Fund:
The Capital of the Bank, of INR0.05b, is held by the Government of India and reserve funds
i.e. Credit (Long-term Operations) Fund, National Agricultural Credit (Stabilization) Fund, National Industrial Credit (Long-Term
Operations) Fund of the Bank are part of other liability.
Assets of Reserve Bank:
1. Foreign Currency Assets:
India's Foreign Exchange Reserves comprise Foreign Currency Assets, Gold, SDR's and Reserve Bank
position with International Monetary Fund (IMF). Foreign currency assets include investments in US Treasury bonds,
Bonds/Treasury Bills of other selected Governments, deposits with foreign central banks, foreign commercial banks, etc. Foreign
currency assets in WSS are the sum of foreign currency assets of both the Issue and Banking Departments. In Issue Department,
these foreign assets back the issuance of notes along with INR securities and gold. In Banking Department, it includes foreign
currency assets and balances with foreign entities like Bank for International Settlements (BIS), foreign commercial banks, etc.
2. Gold Coin Bullion:
It represents the gold coin bullion of Issue Department and Banking Department. The gold reserves of
Issue Department and Banking Department are aligned to international market prices on monthly basis.
3. Rupee Securities:
INR securities (including treasury bills) includes government securities held by Issue and Banking
departments. In Issue Department, INR securities include government securities of that foreign country maturing within 10
years of the Issue Department plus investment in government securities of the Banking Department.
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4. Loans and Advances:
The Reserve Bank gives loans and advances to the Central and State Governments, commercial and co-
operative banks and others (under Section 17 and 18 of the RBI Act, 1934).
4.1 Central Government:
The RBI provides loans and advances to the Central Government to meet the temporary gap between
receipts and payments. These advances are termed as ways and means advances, which are fixed from time to time in
consultation with the Government.
4.2 State Governments:
Loans and advances to the State Governments comprise ways and means advances granted under
Section 17(5) of the RBI Act, 1934. There is a minimum balance to be maintained by the State Governments with the Bank and
this is revised from time to time.
4.3 Loans and Advances to NABARD:
The Reserve Bank can extend loans to NABARD under section 17 (4E) of the RBI Act.
Currently no loans and advances are given to NABARD.
4.4-4.7 Loans and Advances to SCBs, State Co-operative Banks:
Loans and advances to Scheduled Commercial Banks, State Co-
operative Banks made by the RBI under Sections 17 and 18 of the RBI Act, 1934. The loans and advances to SCBs represent
refinance facility made available to banks mainly on account of increase in export credit refinance. At present, ECR refinance
limit is set at 50% of eligible export credit outstanding. ECR is provided at the Repo rate. As per change in accounting practice
with effect from 11 Jul’14, transaction under Repo/Term Repo/MSF with banks is now treated as loans and advances to Banks.
Earlier this amount was treated as investment in Government securities.
4.8 Loans and Advances to Others:
Loans and advances to others include loans and advances made to various funds created
under Section 46 of the RBI Act, 1934. This mainly includes loans given under special refinance schemes to EXIM Bank and
collateralized loans to primary dealers.
5. Bill Purchases and Discounted
5.1 Commercial:
The RBI Act permits holding internal bills of exchange and commercial papers eligible for purchase under
various sub sections of Sections 17 and 18 as a cover for notes issued, they are not held in the books of the RBI at present.
5.2 Treasury bills
purchased and discounted of the Government represent the Government of India Treasury Bills rediscounted
by the Bank, which is kept in the Banking Department.
6. Investment:
This item mainly represents investment of the RBI in Non-Government securities. The major items under this
head are investment in DICGC share capital, Bharatiya Reserve Bank Note Mudran share capital, NABARD share capital, National
Housing Bank share capital, etc.
7. Others Assets:
Other assets include the RBI’s fixed assets like various Premises, furniture, fittings, etc. at different centers,
income accrued but not received and INR coins, which are claims on the Issue Department, small coins that are claims on the
Government, Balances under various heads of expenditure such as charges account, agencies charges account, etc.
This information is gathered from the RBI publication titled
“A Handbook on RBI's Weekly Statistical Supplement”,
18 Jun’14. It
can be found
here.
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th
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NOTES
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Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In
case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on
www.motilaloswal.com.
MOFSL
(erstwhile Motilal Oswal Securities Limited - MOFSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its
stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member
of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance
products. Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
MOFSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOFSL and/or its associates and/or Research Analyst may have
actual/beneficial ownership of 1% or more securities in the subject company in the past 12 months.
MOFSL and its associate company(ies), their directors and Research Analyst and their
relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in
any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as
an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.;
however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of
the views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
Research Analyst may have served
as director/officer, etc. in the subject company in the past 12 months. MOFSL and/or its associates may have received any compensation from the subject company in the past 12 months.
In the past 12 months , MOFSL or any of its associates may have:
1.
managed or co-managed public offering of securities from subject company of this research report,
2.
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
3.
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
4.
Subject Company may have been a client of MOFSL or its associates in the past 12 months.
MOFSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency,
MOFSL has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. MOFSL and / or its
affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOFSL may
have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial
holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income
from clients which are not considered in above disclosures. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only.
While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.).
MOFSL also earns DP income from clients which are not considered in above disclosures.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Disclosure of Interest Statement
Companies where there is interest
Analyst ownership of the stock
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities
and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal
Oswal Financial Services Limited(SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong
Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is
only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction
where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in
Hong Kong.
23 July 2020
11
 Motilal Oswal Financial Services
For U.S:
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934
Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by
MOFSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as
defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on
by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a
chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be
executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered
broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading
securities held by a research analyst account.
For Singapore:
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services
license and an exempt financial adviser in Singapore,
as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110)
provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this
report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of "accredited" institutional investors
as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such
Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose
and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes
investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions
expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific
recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems
necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its
own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those
involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty,
express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this
document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior
notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their
directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They
may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not
subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to
any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any
registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in
whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,
costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.
CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022
7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOFSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company
Law Tribunal, Mumbai Bench.
23 July 2020
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