The import cover of India’s foreign exchange reserves increased to 9.8 months as at September-end 2015 from 8.9 months in March-end 2015, according to the Reserve Bank of India’s ‘Half-yearly Report on Management of Foreign Exchange Reserves’.

Import cover of reserves is the traditional trade-based indicator of reserve adequacy. Adequacy of reserves is an important parameter in gauging a country’s ability to absorb external shocks.

As at September 2015, India’s forex reserves stood at $350.29 billion, up from $341.64 billion in March 2015.

Short-term debt

The RBI report said the ratio of short-term debt to foreign exchange reserves, which was 25 per cent in March 2015, declined to 24.6 per cent in September.

The ratio of volatile capital flows (defined to include cumulative portfolio inflows and short-term debt) to reserves declined to 88 per cent in September from 92.3 per cent in March.

Gold holdings

The Reserve Bank said it held 557.75 tonnes of gold, of which 265.49 tonnes were held overseas with the Bank of England and the Bank for International Settlements (BIS).

Gold as a share of the total foreign exchange reserves in value terms (US dollar) stood at about 5.2 per cent in September 2015, against 6.4 per cent in September 2014. Gold formed about 5.6 per cent of the total foreign exchange reserves in value terms as at March 2015.

In September, of the total foreign currency assets of $326.8 billion ($317.3 billion as at March-end 2015), $214.8 billion was invested in securities, $97.2 billion deposited with other central banks — the BIS and the International Monetary Fund — and the remaining $14.8 billion comprised deposits with overseas branches of commercial banks.

Rate of interest

The rate of earnings on foreign currency assets, which was 1.21 per cent during July 2013 to June 2014 (RBI financial year), increased to 1.36 per cent during July 2014 to June 2015.

The report said the Reserve Bank has the mandate to invest up to $5 billion in the bonds issued by the India Infrastructure Finance Company (UK) Ltd. As of September 2015, the amount invested in such bonds stood at $2.1 billion.