Rbi Panel For Changes In Debt Compilation

The Reserve Bank of India's technical committee on external debt has identified specific modifications in the concept and method of compiling external debt. The disparity in calculating the external debt figure arising from compilation done by various national and international agencies will be eliminated by using the procedure.

The technical group was constituted by the Reserve Bank of India (RBI) under the chairmanship of M R Nair, advisor, RBI in March 1998. In its report released yesterday, the committee has recommended that the short-term debt of the country should include short-term deposits of NRIs, cross-border bank claims, and all trade-related credit with maturity up to and including one year. Trade-related credits of original maturity of six months to one year may be shown separately, the report said.

 

The Nair committee has recommended that RBI should be empowered to collect information from entities with external liabilities and assets. It has suggested that the Census of India's Foreign Liabilities and Assets should cover i) FII investments in debt instruments at market prices; ii) liabilities and assets of branches of Indian banks abroad; iii) liabilities and assets of subsidiaries of Indian companies; iv) trade credit of less than six months; v) FCNR(B) held abroad, proceeds from ECBs FCCBs etc.; and vi) contingent external liabilities of banks and companies.

The committee has suggested that, since the derivative transactions result in change in the currency composition of external debt as also its maturity profile, it is necessary to capture information on such transaction on an ongoing basis. Further, operational leases where the total lease payments exceed 75 per cent of the value of the underlying asset may be incorporated in external debt in a manner similar to financial leases.

The committee also suggests measures to gauge the external indebtedness of the country. These include: i) short term to unencumbered forex reserve ratio; ii) external liabilities to foreign assets ratio; iii) debt service ratio and its movements; iv) to overcome the problem of under representation conventional debt service ratio should include principal payment (including roll-overs) of short term debt and NRI deposits; v) debt service payment to reserves; and vi) continued monitoring of valuation effects, maturity structure and currency composition of debt.