Bank buys $5.07bn at a price lower than when it sold IMD proceeds in 2000. | |
| State Bank of India (SBI) today enjoyed a bonanza of Rs 781.33 crore as it bought $5.107 billion dollars at a price lower than what it received when it sold the proceeds India Millennium Deposits (IMDs) in November 2000. |
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| SBI bought the foreign exchange in two tranches from the Reserve Bank of India (RBI) since yesterday at average cost of Rs 45.12 per dollar, against about Rs 46.65 per dollar it received when it brought in $5.5 billion of IMD proceeds into the country five years ago. |
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| The government-owned bank has seen an exchange rate gain for the first time. Earlier, both for $1.8 billion of India Development Bonds (IDBs) in 1991 and $4.8 billion of Resurgent India Bonds (RIBs) in 1998, the bank had to bear exchange loss as the rupee had depreciated by the time the bonds matured. |
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| The RBI said SBI will buy another $1.97 billion on December 29, 2005, the maturity day of the IMDs, to complete the purchase of $5.136 billion of foreign exchange for redemption of the deposits. The total outgo from foreign exchange reserves for IMD redemption will be $7.079 billion, including the principal and interest thereon. Some IMD holders had opted for half-yearly and yearly interest payment options. |
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| SBI bought $28.606 million yesterday for Rs 129.18 crore. It purchased $4.54 billion, pound 233.25 million and euro 113.17 million for an aggregate amount of Rs 22,915.69 crore today. |
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| The RBI had purchased the IMD proceeds from SBI at the then prevailing market rates and is now selling foreign currency to the bank at current market rates. |
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| When SBI buys the remaining $1.97 billion tomorrow, it will book a similar exchange rate gain as the rupee's exchange rate currently is around the price at which is bought $5.107 billion. |
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| The rupee today closed at Rs 45.14 per dollar, almost flat from yesterday's close. The bank would book an exchange rate gain of another Rs 297.47 crore if it buys the remaining foreign exchange requirement at today's closing price. |
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| Expecting an exchange loss as in the case of IDBs and RIBs, the government, the RBI and SBI had put in a mechanism for sharing the exchange loss on IMDs on the lines of the one put in place for the RIBs. |
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| As per the arrangement, SBI was to bear exchange loss equivalent to one per cent of the IMD proceeds and the rest was to be borne by the government. |
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| SBI had made its contributions to cover for exchange loss in 2001-02 and 2002-03, but did not make any provisions in 2003-04 and 2004-05 as the rupee had appreciated from the November 2000 levels. |
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| The government made a provision of just Rs 1 crore for exchange loss on IMDs in 2005-06, against provisions of Rs 208 crore in 2004-05 and Rs 423.90 crore in 2003-04. |
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