Balance Sheet Analysis

Balance Sheet of RBI on 30th June 2010

Balance sheet analysis is good tool to simplify balance sheet. There are lots of parties who are interested in company. They trust on the financial data. Balance sheets provide lots of financial data to all such parties. But, there are lots of facts in the balance sheet which can not be understood by some of interested parties. So, they take the help of their CA or professional accounting association for analysis the balance sheet.

Today, you will learn how to analyze the balance sheet. For this, we are taking the balance sheet of Reserve Bank of India on 30th June 2010 as example. You know that RBI is the central bank of India. It controls banking policy of India.  It also issues the currency of India. Due to double duty, its balance sheet is made into two parts. First balance sheet is of its Issue department and other balance sheet of its banking department.

Analysis of RBI's Balance Sheet 

Right side, I have showed the balance sheet of RBI on 30th June 2010. Balance sheet shows assets and liabilities on any specific day. Next day, it may be possible that the figures of balance sheet may be different.

1st : Point of Analysis of Balance Sheet : Assets 


On 30th June 2010, total assets of RBI ( Issue department) are Rs. 842409791 thousand. But we are interested to know what is in it? I can explain it in following presentation. In this presentation, I show that total assets' 94% in the form of gold coin right and I have not mentioned separately because all other assets like rupee coin, rupee securities because all other assets are just 6% of total asset. One of interesting thing in the balance sheet of banking department that our total assets' 47% is in the form of balance held abroad. If we compare reserves bank of India's total asset with Federal Reserve bank of USA. In FED, we will find that US treasury rights are the big part of total assets.

2nd : Point of Analysis of Balance Sheet : Liabilities 


For analysis of balance sheet, we should also learn about the liabilities of any organization. If we talk about RBI's balance sheet. RBI has printed and issued Rs. 8420409791 thousand notes. This is also total liability of RBI's issue department. This notes are used as currency, so it is 100% of total liabilities of RBI's issue department.



3rd : Point of Analysis of Balance Sheet : Equity Capital 


Understanding of Equity capital of any organization is also necessary for dealing that organization. When any organization starts it invested first of all equity capital in different projects. So, equity capital is the main source of fund of company. But when company liquidates, at that time we sell our assets and pays to our liabilities and equity capital. It means at the end of company, our assets become our source of fund.

In RBI's balance sheet, we see just Rs. 5,00,000 thousand paid up capital of its Banking department. It is calculated by deducting all other liabilities from total asset of RBI. RBI has taken loan from banks and it has also some big proportion of Government liabilities. All govt. expenditures are fulfilled from RBI fund. RBI has also reserve fund.  Every commercial bank has to keep certain minimum cash reserves with RBI.So, it is the part of liability of RBI and it is deducted for calculating the paid up capital of RBI.