The country’s import cover in foreign exchange reserves increased to 8.9 months as of March- end, compared with 8.1 months as of end- September, the Reserve Bank of India (RBI) said on Tuesday in its half- yearly report on foreign exchange reserves. Import cover dipped below seven per cent during the currency crisis of 2013, with total reserves hitting around $ 274 billion in early September 2013.
The currency crisis prompted the central bank and the government to announce several steps to attract inflows and curb imports of non- essential items which stabilised the rupee and foreign exchange reserves started swelling. As of end- March 2015, reserves were at $ 341.64 billion and then further went up to$ 353 billion, for the week ended July 17, latest data from RBI showed.
Total foreign exchange reserves were at an all- time high of $ 355.46 billion for the week ended June 19, before coming down marginally.
The report also highlighted that the ratio of short- term debt to foreign exchange reserves also declined from 27.7 per cent at end- September 2014, to 24.8 per cent at end- March 2015.
“The ratio of volatile capital flows ( defined to include cumulative portfolio inflows and short- term debt) to the reserves has declined from 94.3 per cent as at endSeptember 2014 to 91.7 per cent as at end- March 2015,” the report pointed out.
The net forward outstanding (receivables) of the central bank in the domestic foreign exchange market remained flat at $ 8,322 million as at the end of March, compared with $8,421 million as at the end of September, 2014.
The investment pattern of RBI’s foreign currency assets shows the central bank has cut down on investments in deposits with overseas branches of commercial banks by almost half to $ 8.79 billion.
As at end- March, of the total foreign currency assets of $ 317.3 billion, $ 204.5 billion was invested in securities, $ 104.0 billion was deposited with other central banks, the Bank for International Settlements and the International Monetary Fund ( IMF), RBI said.
RBI had signed a memorandum of understanding with the government and RBI in March 2014 for the transfer of the government’s special drawing rights ( SDR) holdings in its SDR account with the IMF to RBI in a phased manner.
While the first tranche of SDRs equivalent to $ 820 million was transferred to RBI on March 24, 2014, the second tranche of SDRs equivalent to $820 million was transferred to RBI on January 12, 2015.
Business Standard, New Delhi, 29th July 2015
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