The Reserve Bank of India’s contingency fund has depleted to Rs 1.96 lakh crore after its Rs 52,000 crore excess payout to the government, according to its annual report for 2018-’19 that was published on Thursday. Earlier this week, the central bank granted the government Rs 1.76 lakh crore.

In its meeting on Monday, the RBI’s central board decided to transfer Rs 1,23,414 crore of surplus for 2018-’19 and Rs 52,637 crore of excess provisions identified by a revised economic capital framework. The central bank took the decision after accepting the recommendations of a panel led by former RBI Governor Bimal Jalan. The move was heavily criticised.

In its annual report, the RBI added that as of June 30 it “stands as a central bank with one of the highest levels of financial resilience globally”.

The Jalan Committee had suggested that the RBI keep its capital reserves in the range of 5.5% to 6.5% of the balance sheet. It said the 5.5% level was sufficient in the event the top 10 banks crash. Even in that situation, the RBI will have enough reserves to perform its function as the lender of last resort.

The annual report said the central bank’s income from domestic sources rose 132.07% to Rs 1,18,078 crore from Rs 50,880 crore in the previous financial year.

The RBI added that low domestic demand was holding back “animal spirits” in the economy. It said the government should focus on improving the ease of doing business, reform the factors of production, and speed up the implementation of capital expenditures.

“Nonetheless, there are still structural issues in land, labour, agricultural marketing and the like, which need to be addressed,” the report said. “The disaggregated analysis confirms that a broad-based cyclical downturn is under way in several sectors – manufacturing; trade, hotels, transport, communication and broadcasting; construction; and agriculture.”

The central bank also said that cash in circulation had risen 17% to Rs 21.1 lakh crore as of March 2019 despite a push for digital transactions. “The value and volume of banknotes in circulation increased by 17% and 6.2% to Rs 21.1 lakh crore and 1,08,759 million pieces, respectively, in FY19,” the bank said.

The RBI added that the Rs 500 note now accounts for 51% of the currency in circulation.

There have been fears of an economic slowdown after India’s Gross Domestic Product growth rate touched a five-year low of 5.8% in the last quarter of 2018-’19. United States-based financial services company Moody’s last week downgraded India’s projected GDP Product growth rate to 6.2% for 2019-’20.

Last week, Union Finance Minister Nirmala Sitharaman announced a slew of measures to boost the economy, less than two months after presenting the Union Budget.

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