Money & Banking

Import cover of forex reserves rises to 12 months

Our Bureau Mumbai | Updated on January 12, 2018 Published on January 12, 2017

The import cover of India’s foreign exchange reserves has increased to 12 months as on September-end 2016 from 10.9 months as on March-end 2016, according to the Reserve Bank of India.

Import cover of reserves is a traditional trade-based indicator of reserve adequacy. It is defined in terms of the number of months of import equivalent to reserves. After declining from seven months of imports as of March-end 2013 to 6.6 months of imports as of September-end 2013, the import cover of the country’s reserves steadily climbed in each of the half-year periods since then.

The other components — ratio of short-term debt to reserves and ratio of volatile capital flows — that indicate adequacy of foreign exchange reserves have shown improvement in the reporting half year (April-September 2016). According to the RBI’s half-yearly report on management of foreign exchange reserves, the ratio of short-term debt to foreign exchange reserves, which was 23.1 per cent at end-March 2016, declined to 21.8 per cent at end-September 2016.

Gold reserves

The Reserve Bank holds 557.77 tonnes of gold (unchanged from March-end 2016); of which, 265.49 tonnes are held overseas in safe custody 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 dollars), stood at about 5.75 per cent as of end-September, 2016, compared with about 5.6 per cent as of end-March, 2016.

As of end-September 2016, out of the total foreign currency assets of $346.7 billion ($336.1 billion), $229 billion ($225 billion) was invested in securities, $95.7 billion ($91.6 billion) was deposited with other central banks, the BIS and the IMF and the remaining $22 billion ($19.7 billion) comprised deposits with overseas branches of commercial banks.

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Published on January 12, 2017
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