Rising Forex Assets Help Liquidity

Since the banking sector has paid for the increased forex assets by releasing money into the system, it has resulted in higher domestic liquidity.

Another reason for the growth in forex assets in rupee terms is depreciation. In August 1996, for example, the rupee depreciated against all major currencies. In percentage terms, the rate of increase has been high, being 10.8 per cent year-on-year as on August 30. But this is due to the fact that forex assets actually declined during the corresponding period of last year. Last year, forex assets fell from Rs 75,924 crore as on March 31 to Rs 73,067 crore as on September 29.