Idbs Worth $187m Swapped In Rs

The first tranche of India Development Bonds (IDBs) worth $418 million were redeemed yesterday. A sizeable chunk of it is expected to be retained in the country.

Of $418 million, the amount redeemed in rupees were $187 million and the balance was redeemed in dollars. However, a top official of Reserve Bank said most redemptions in dollars are expected to be retained in the country in the form of FCNR (B) deposits or NRE liabilities.

Of the total redemption amount, the Reserve Bank of India (RBI) has paid foreign currency to the tune of $231 million towards redemption of the bond held by non resident Indians (NRIs). The rest, amounting to $187 million, has been transferred by the original bond holders to domestic bank accounts in India operated by Indian residents. This portion was redeemed in rupees. The percentage of redemption in dollars thus stands at 55.26 per cent to NRIs, while it is 44.74 per cent in rupees to Indian residents.

The foreign currency assets, after the redemption, stood at $ 19.54 billion. As per the RBIs weekly statistical supplement, the reserves stood at $19.748 billion on January 3, 1997, and at $ 19.802 billion on December 27, 1996. This indicates a difference of $208 million. Dealers estimate that, if the RBIs drawals from the foreign currency reserves amounted to approximately $50 million on a weekly basis, then the repatriation is approximately $150 million. However, sources at the State Bank of India and the Reserve Bank of India are confident that a greater portion of the money will return to the country in the form of the NRI bank deposit under the various schemes offered by the banking system.

The IDBs were issued by the SBI on behalf of the Government of India in January 1992 to boost the countrys foreign currency reserves. In accordance with the terms of the instrument, the central bank bears the exchange risk. The rupee has depreciated from Rs 25.50, the rate at the time of issuing IDBs, to 35.86 at present.

Bond holders have the following options at the time of maturity redeem the instrument and repatriate the proceeds; invest in FCNR(B) deposits which are fully repatriable and carry a rate ranging from 4.5 per cent to 6.25 per cent on maturities of 6 months to 3 years; invest in semi-repatriable NRE deposits, which yield 12 per cent to 14.5 per cent on maturities ranging from one to three years; or, invest in NRNR deposits which yield 15 to 16.5 on maturities ranging from one to three years.

SBI sources earlier told Business Standard that nearly 50 per cent of the $2.2-billion issue had been converted into rupees. They added that of the balance $1.1 billion, $100 million had been converted into FCNR(B) funds.