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RBI’s Annual Report 2020-21

Editor1 Jun 1 2021 Current Affairs

Recently, the Reserve Bank of India (RBI) released its Annual Report for 2020-21.

Key Points

  • Foreign Exchange:
    • Gain from foreign exchange transactions rose from Rs 29,993 crore to Rs 50,629 crore in 2020-21.
      • Foreign Exchange is the trading of one currency for another.
  • Surplus Transfer to the Government:
    • RBI has been able to transfer a higher amount to the government as surplus this year following a sharp fall in provisions (drop in expenditure was on account of a lower provision) and gains from foreign exchange transactions during the year ended March 2021.
      • It transferred Rs. 99,122 crore to the government which is likely to boost the government’s finances. It helped the government even as the Covid pandemic continued.
      • Rupee Against Dollar:
        • The rupee strengthened by 3.5% against the US dollar (at end-March 2021 over end-March 2020) but underperformed vis-a-vis other Asian countries during 2020-21.
      • Decreased Bank Frauds:
        • Bank frauds of Rs.1 lakh and more fell by 25% in value to Rs.1.38 trillion in the year 2020-21 with the number of such cases also seeing a decline of 15% during the year.
      • Digital Payments:
        • The Covid-19 pandemic increased the proliferation of digital modes of payments.
          • Total digital transaction volume in 2020-21 stood at 4,371 crore, as against 3,412 crore in 2019-20.
        • The prospects for FinTech in India’s financial system in 2021-22 will depend upon the degree of entrenchment of digital usage.
        • Various initiatives such as an innovation hub, a regulatory sandbox and offline payment solutions are underway to ensure that in the digital ecosystem, India maintains its position as a leader.
        • The RBI is also in the process of extending the geo-tagging framework put in place to capture location of bank branches and ATMs to cover payment system touch points, enabling accurate capture of their location across the country.
        • Further, the possibility of leveraging India’s domestic payment systems to facilitate cross-border transactions is being explored, and corridors and charges for inward remittances will be reviewed.
      • Ensuring Liquidity:
        • The RBI will ensure a comfortable level of liquidity in the system during 2021- 22 in alignment with the stance of monetary policy.
        • Monetary transmission will continue unimpeded while maintaining financial stability.
          • Monetary transmission refers to the process by which a central bank’s monetary policy signals (like repo rate) are passed on, through the financial system to influence the businesses and households.
      • Economic Growth:
        • As the vaccination drive picks up and cases of infections fall, a sharp turnaround in growth is likely, supported by strong favourable base effects.
          • The base effect refers to the effect that the choice of a basis of comparison or reference can have on the result of the comparison between data points.
        • RBI predicted 10.5% GDP (Gross Domestic Product) growth for the year 2021-22.

 

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