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How to read RBI’s monthly bulletin
As in any country, the banking sector is the back-bone of the economy. The Reserve Bank of India monitors the sector and determines lending and borrowing rates that influence financial markets. It holds the key to sustained growth of the economy. The impact of its policies reverberates across sectors – banking and otherwise.
These policies are based on its regular review of the economy. RBI regularly puts out publications and reports. These are rich in data and give in-depth information about the Indian economy and its industries. They impact stock markets. One such report is the ‘Monthly Bulletin’. Although the content in the bulletin is for the month gone by, it is a good read to understand factors influencing its policies.
As an investor, here are things to read in the bulletin:
Monetary policy commentary:
One of the key responsibilities of the RBI is to decide the monetary policy. This includes fixing key interest rates, stabilizing the rupee, and sale or purchase of Government bonds. This is very important, as it affects the entire economy, its growth, inflation, the exchange rate, corporate profitability, stock markets as well as individuals. The first portion of the bulletin is a detailed report about the changes in the policy and reasons for the same.
The bulletin regularly contains commentary from RBI’s public statements on inflation. The credit policy statement, if announced in the month gone by, explains factors that could influence inflation in the future. A key aim of the RBI’s monetary policy is to curb inflation.
This quarterly survey is published ahead of the credit policy and included in the subsequent monthly bulletin too. It looks at the overall performance of the economy. It states the key risks that hamper growth, the positive factors that will improve economic conditions, and so on. The report also gives the RBI’s estimates of economic growth for the fiscal year. Since companies are directly affected by overall economic conditions, the review helps understand how companies are likely to perform in the near future. This in turn will affect the markets.
In a globalised world, every country trades with another. Even companies borrow money or lend directly in international markets. All this forms the external sector. The higher the debt in a country’s external sector, the greater are its risks. India’s current account deficit – the amount it owes to the world – rose nearly 10-fold in the past five years. This is one of the key reasons for the rupee’s fall. An entire section in the bulletin is usually devoted to this aspect.
Every now and then, the RBI researches on very specific subjects like housing prices, impact of high interest rates on companies, use of electronic payment systems, etc. The resulting reports are a wealth of information, and come very handy in understanding how the economy functions. These are either special articles or speeches by the RBI governor or deputy governors. They reflect the RBI’s assessment of the economy.
As a regulator of the banking sector, the RBI closely monitors the strengths and risks of the industry. This includes banks, non-banking finance companies (NBFCs), currency circulation, money supply, and so on. The monthly bulletin publishes reports on asset quality, growth in loan growth, growth in deposits among other things. These help identify growth areas, stress factors, and so on.
The RBI is also the central government’s banker. It thus regularly publishes data about the state of the government’s finances – its borrowings, expenses and so on. This helps estimate if the government is going to spend more than it earns.
Rs 61,804 crore
Just like any other organisation, the RBI too reports its financial performance. For the accounting year 2012-13, the RBI announced a surplus of Rs 61,804 crore, up 43.6% from the previous year. This means its total assets exceed its liabilities.