The Hindu Business Line : Returns on forex assets dip to 2.8 pc

THE returns on the country's foreign currency assets during 2002-03 (July-June) had fallen to 2.8 per cent from 4.1 per cent in the previous year. This excludes the capital gains less depreciation.

The fall, according to the Reserve Bank of India, is mainly due to lower international interest rates.

According to a report on the foreign exchange reserves released by the RBI, as on September 30, 2003 out of the total reserves of $91.136 billion, $87.213 billion was deployed in foreign currency assets. Of the remaining, $31.740 billion was invested in securities, $39.635 billion in deposits with other central banks and Bank for International Settlements (BIS), $15.838 billion in deposits with foreign commercial banks, $4 million in special drawing rights and $3.919 billion in gold and gold deposits.

This report will now be a bi-annual publication with a three-month lag based on figures of March 31 and September 30.

Gold holdings of RBI have undergone relatively few changes in the recent years. At present, RBI holds about 357 tonnes of gold, forming about 4.3 per cent of total foreign exchange reserves as on September 30, 2003.

Of these, 65 tonnes are being held abroad since 1991 in deposits with Bank of England and BIS. The average return on these deposits, which are of a short-term nature, was around 0.6 per cent during the financial year 2002-03, down from 0.9 per cent in the previous year.

The ratio of short-term debt to foreign exchange reserves declined from 146.5 per cent at end-March 1991 to 6.1 per cent at end-March 2003. Similarly, the ratio of volatile capital flows (defined to include cumulative portfolio inflows and short-term debt) to reserves declined from 146.6 per cent as at end-March 1991 to 38.2 per cent as at end-March 2003.