Money & Banking

India’s forex reserves can cover 10 months’ imports, says RBI

Our Bureau Mumbai | Updated on December 22, 2019 Published on December 22, 2019

The import cover of reserves shows how long imports can be sustained in the event of a shock

The import cover of India’s foreign exchange reserves increased to 10 months as at June-end 2019 from 9.6 months as at March-end 2019, per 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 foreign exchange reserve adequacy. It shows how long imports can be sustained in the event of a shock.

As at June-end 2019, India’s forex reserves, which include foreign currency assets (FCA), gold, special drawing rights (SDRs) and Reserve Tranche Position (RTP) in the IMF, stood at $429.837 billion. As at September-end 2019, the reserves had risen to $433.707 billion.

According to the report, the ratio of short-term debt (original maturity) to reserves, which was 26.3 per cent at end-March 2019, declined to 25.5 per cent at end-June 2019.

The ratio of volatile capital flows (including cumulative portfolio inflows and outstanding short-term debt) to reserves declined from 88.7 per cent in March-end 2019 to 86.7 per cent inJune-end 2019.

As at September-end 2019, the Reserve Bank held 618.17 tonnes of gold, with 325.87 tonnes being held overseas in safe custody with the Bank of England and the Bank for International Settlements, while the remaining gold is held domestically, the report said.

In value terms (US Dollar), the share of gold in the total forex reserves increased marginally from about 5.59 per cent as at end-March 2019 to about 6.14 per cent as at end-September 2019.

Foreign currency assets

As at end-September 2019, out of the total foreign currency assets of $402.03 billion, $256.17 billion was invested in securities, $115.89 billion was deposited with other central banks and the BIS and the balance $29.96 billion comprised deposits with overseas branches of commercial banks.

Published on December 22, 2019
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