Why Currency and Gold Revaluation Account and Investment Revaluation Account Credit balances shown as part of the capital and reserves on the RBI’s Balance Sheet cannot be transferred to Government of India 

These reserves are nothing but Revaluation reserves which represent periodic marked to market unrealised gains/losses  in the value of Assets on the RBI’s Balance Sheet and currently add up to about ₹7 trillion on RBI’s total assets of about ₹ 36 trillion , constituting about 20% of total assets . The other component of RBI’s capital and reserves of ₹2.5 trillion , constituting about 7% of total assets , comprise equity capital and contingency fund arising from interest income . Thus the total capital and reserves add up to about ₹9.5 trillion constituting 27% of total assets on RBI’s Balance Sheet. 

As regards the first component , namely, Revaluation reserves of ₹ 7 trillion, the only way it can be transferred to Government is by actually selling the ₹33.5 trillion ( ₹36-₹2.5 ) worth of RBI’s assets, and that too,  if and only if , the value of assets being sold does not go down , which it definitely will, given the sheer size  of the  assets ( 93% of its total assets ) on sale ! Even if we assume for the sake of argument that it doesn’t ,and will not ,go down, this will still result in the massive collapse/ shrinking/ contraction of RBI’s Balance Sheet ,and , therefore,  equally also of the high powered Reserve /Base Money and the matching collapse/ shrinking/ contraction in the broader Money Supply M3 , delivering the catastrophic and cataclysmic shock , bordering on a veritable financial and economic nuclear winter , to the real economy within no time with the matching collapse in output and employment due to involuntarily resulting exceptionally high interest rates ! 

The other component worth ₹2.5 trillion can of course be transferred but at the cost of making of making RBI’s core Tier 1 capital to Assets Ratio zero ! 

Whenever the US Dollar strengthens alongside the rise in the US 10 year yield, market analysts' stock refrain is to attribute the same to the rise in yields . But this is not at all so because when yields rise , it only means that there is considerable increase in net sellers of US treasuries and therefore if anything market must be selling and not buying dollars  ! So the real and correct explanation  has to be something else .  The real and correct explanation is that massive net selling in US treasuries, which pushed the 10 year UST yield to 3.20% recently ,  forced the global investors to sell their non dollar profitable investments to cover losses on the US treasuries leading to conversion of non dollar currencies into US dollar resulting in its recent appreciation. Exactly the same thing happened during the taper tantrum in 2013 but was again fallaciously explained then as now  ! This fallacious reasoning of analysts owes itself to the common but correct understanding that higher short term policy rates cause the currency concerned to appreciate ! Typically if the central bank is not behind the curve in tightening, thus credibly assuring the markets of its resolve to keep inflation in check , 10 year yields may not increase at all and if anything, if the central bank is perceived by the markets to be ahead of the curve in its tightening , 10 year yields may actually fall rather than rise ! With this explanation, I hope I have been able to unclutter the clutter !