Forex Reserves Plummet To $28.67 Bn

The foreign currency assets (FCA) of the Reserve Bank of India (RBI) declined by $526 million to $25,469 million during the second week of May.

The stock of gold and special drawing rights (SDR) held by the apex bank stood unchanged at $3,184 million and $13 million respectively.

Consequently there was a decline in the forex reserves to $28,666 million on May 15.

During the current financial year, forex reserves have declined by $701 million till May 15. The bulk of the change can be explained by the $506 million decline in FCA of the Reserve Bank. The stock of gold held by the central bank declined by $207 million while the stock of SDR held by RBI increased by $13 million for the current financial year.

 

With the imposition of sanctions and the revision in the outlook on India's sovereign rating by Standard & Poor's to 'negative' from 'stable', forex inflows are going to be affected over the short run.

The latest figures released by the Reserve Bank reveal that total funds flow from the banking sector to the commercial sector declined by Rs 1,396 crore during the current financial year.

During the fortnight ended May 8, while non food credit declined by Rs 2,165 crore, food credit grew Rs 949 crore. During the current financial year, pure bank credit (not including investments in corporate paper) has declined by Rs 183 crore as against a Rs 865 crore decline in the corresponding period in 1997-98.

n Deposits grew by Rs 466 crore during the fortnight ended May 8, thereby taking the absolute increase in aggregate deposits of the banking system to Rs 9,424 crore till date in 1998-99.

n As against this, investments in government and other approved securities increased by Rs 10,054 crore till date despite a Rs 1,216-crore decline recorded during the fortnight ending May 8.

n As on May 8, the cash-deposit ratio, investment-deposit ratio and the credit-deposit ratio of the banking system stood at 11.08, 37.31 and 52.66 respectively.

n Among monetary aggregates, money supply increased by 2.1 per cent in the current fiscal and the year-on-year growth in money supply as on April 24 was 17.3 per cent.

In the subsequent weeks, i.e the week ending May 1 and May 8 the reserve money grew by 5.4 per cent and 2.4 per cent respectively. During the current financial year, reserve money has grown by 3.28 per cent with the year-on-year growth being 12.5 per cent as on May 8.

The growth in reserve money in this year has been primarily because of a 9.8 per cent growth in net Reserve Bank credit to the government as against a 2.8 per cent growth in the same period in 1997-98.