Forex Reserves Rise A Meagre $7 Million

The foreign exchange reserves have increased by only $7 million to $45.365 billion during the week ended September 7, compared with a healthy rise of $406 million during the previous week.

Analysts attribute the slowdown in the accretion to the forex kitty to the foreign portfolio / direct investment coming to almost a standstill in the wake of the global economic slowdown.

The growth in the forex reserves is solely on account of $7 million accruing to the foreign currency assets (FCA). The FCA touched $42.544 billion in the reporting week compared with $ 42.537 billion during the previous week.

The gold reserves and special drawing rights remained static at $2,817 million and $4 million respectively.

The September 11 terrorist attacks on the World Trade Centre and the Pentagon, the symbols of the US' economic and military might respectively, led the foreign institutional investors (FIIs) to sell heavily on the domestic stock markets to meet possible redemption pressure back home.

The sell-off by the FIIs, coupled with the rise in international crude oil prices in the aftermath of the attacks, saw the rupee plunge to a new low of Rs 47.81/83 against the greenback. Aggressive demand for the dollar by the foreign portfolio investors and domestic importers saw the rupee depreciate by 42 paise since September 11.

Aggregate deposits of the scheduled commercial banks (SCBs), during the week ended August 31, have gone up by Rs 5,683 crore to touch Rs 10,35,822 crore compared with Rs 10,30,139 crore as on August 24. The demand deposits fell by Rs 2,167 crore to Rs 1,41,710 crore, while the time deposits increased by Rs 7,850 crore to Rs 8,94,112 crore.

So far, during this fiscal, the aggregate deposits of the SCBs have grown by 7.6 per cent (6.1 per cent in the corresponding period of 2000-01) at Rs 73,204 crore (Rs 49,911 crore).

The reserve money, during the week ended September 7, has grown by 6.2 per cent (Rs 18,348 crore) to Rs 3,14,684 crore compared with a 3.8 per cent growth (Rs 11,574 crore) in the previous week.

During the week ended August 31, the non-food credit showed signs of pick up and rose by Rs 1,305 crore to Rs 4,78,485 crore, while the food credit declined by Rs 299 crore to Rs 50,338 crore.

Overall, the bank credit during this fiscal, so far, has grown, albeit at a slower pace, by 3.4 per cent (6 per cent) at Rs 17,389 crore (Rs 26,307 crore).

Investments by the banks, especially in the government securities, rose by Rs 10,476 crore to Rs 4,17,895 crore in the reporting week. So far, during this fiscal, investments by the SCBs grew at a faster rate of 12.9 per cent (Rs 47,736 crore) compared with 7.6 per cent (Rs 23,538 crore) in the corresponding period in 2000-01.

The increased investments by the banks indicates that the credit off-take is poor and points to the slowdown in the economy.