Business Standard

Policy forecasts stable external balance of payment

Related News

The third quarter review of monetary policy 2008-09 has forecast a stable external balance of payment situation, of deficit current account balance — due to outstanding external debt with residual maturity of less than one year — as “misplaced”.

The current account is the difference between a nation’s exports and imports of goods and services in a financial year, if all financial transfers and investments and the like are ignored. A nation is said to have a current account deficit if it is importing more than it exports.

According to the central bank analysis, the country’s total external debt, with residual maturity of less than a year as on March 2008 and which would mature in FY09, is estimated at $85 billion.

While sovereign debt and commercial borrowings are most likely to be rolled over during 2008-09, current trends indicate that maturing debt on account of foreign currency denominated deposits by non-resident Indians (NRIs)will not only get rolled over. But RBI expect net accretions, said the report.

NRI deposits are likely to get further accretions since interest rates have been revised upwards since September 2008. Non-resident deposits, maintained as FCNR (B) and NR(E) RA deposits, witnessed interest rate ceilings pegged to Libor minus 50 basis points (bps) increase to minus 25 basis points and plus 50 bps, respectively in September 2008.

These rates were further revised upwards by 50 bps each to Libor plus 25 bps (for FCNR(B)) deposits and Libor plus 100 bps for NR(E)NR deposits in October 2008. Thereafter, in November 2008, both these rates were further increased by 75 bps to Libor plus 100 bps for FCNR(B) deposits and Libor plus 175 bps for NR(E)RA deposits.

The data available with the central bank on NRI deposits up to December 2008 indicates positive accretion, which leaves the total trade deficit to be repaid in 2008-09 to $43.2 billion. Of this around $28.1 billion has already been disbursed in April-November 2008, leaving a balance of $15.1 billion.

RBI is of the view that the balance trade deficit could be compensated with large inflows in pipeline on account of commitments of buyer’s credit by the importers and oil companies.

“India’s external payment situation remains stable even conservatively projecting that only a small portion of this balance would be rolled over,” said the central bank.

Read more on:   
|
|
|

Read More

Going out of Citi Suvidha? Keep higher balance

Citi India’s ‘Suvidha’ salary account holders will need to maintain a monthly net relationship value of Rs 1 lakh if their salary is no longer ...

Advertisements

Quick Links

More news from Finance Rss icon

Increase in provisions pulls down IDFC's net profit by 14% in Q2

The board also approved the demerger of financial undertaking of IDFC into IDFC Bank

Andhra Bank Q2 net more than doubles at Rs 144.5 crore

Retail credit saw high growth during the quarter registering an year on year increase of 18.6%

Vijaya Bank raises Rs 500 cr via bonds

The bank has shareholders nod to raise additional equity capital of Rs 600 crore from the markets

Back to Top