Forex assets down by 66 million

MUMBAI, APR 24: The rise in foreign exchange reserves has been arrested. India's foreign currency assets FCA were down by 66 million ...

MUMBAI, APR 24: The rise in foreign exchange reserves has been arrested. India8217;s foreign currency assets FCA were down by 66 million to 29,613 million during the week ended April 16, 1999.

The fall in FCA followed an increase of 112 million during the week ended April 9 and a whopping 960 million rise in the preceding week. During the week, total foreign exchange reserves were also down by 66 million to 32,581 million, with gold and special drawing rights SDRs remaining static at 2,960 million and eight million respectively, according to Reserve Bank of India8217;s weekly statistical supplement.

Since end-March 1999, the increase in FCA has been to the extent of 91 million. The fall in the forex level of late has been attributed to the selling pressure by foreign investors in Indian markets. 8220;Political uncertainty is one reason for the forex decline,8221; said a banker. The RBI said central government8217;s access to ways and means advances WMA from RBI almost reached the ceiling of Rs13,000 crore set for April-September 1999. The government borrowed Rs 6,399 crore from RBI during the week ended April 9 taking the total outstanding to Rs 12,959 crore. On the other hand, bank credit to the commercial sector rose by Rs 4,446 crore between March 27 and April 9, according to RBI8217;s statistical supplement.

The increase during the period was almost double that of Rs 2,380 in the similar period last year. The total outstanding non-food credit has gone up to Rs 3,53,633 crore as on April 9, 1999 from Rs 3,49,187 crore as on March 26, 1999.

Non-food credit during 1998-99 had grown at a slower rate of 12.1 per cent against 15.1 per cent during 1997-98. In volume terms too, the growth was lower at Rs 37,594 crore compared to Rs 40,789 crore in 1997-98. During March 27-April 9 period, commercial banks8217; investments in government securities was lower at Rs 7,952 crore compared to Rs 9,209 crore in similar period last year. In the same period, increase in time deposits with commercial banks was lowerat Rs 5,377 crore against Rs 7,334 crore in similar period of previous year. The total outstanding time deposits with commercial banks stood at Rs 6,09,168 crore as on April 9, 1999.

Meanwhile, the Reserve Bank has eased the ceiling on interest rates charged on advances against deposits by directing banks to charge a suitable rate on interest on loans against deposits without reference to the ceiling of the Prime lending rate. The apex bank has also said that the relaxed asset classification norms for banks to tide over cyclical problems will come into effect from the year ended March 31, 1999.

The easing of rates effectively means that the rates on advances shall be higher than the interest rates paid on respective deposits. This move is likely to benefit banks which have been collecting deposit at higher rate but giving advances against such deposits at rates with reference to the banks8217; PLR. At present, banks cannot charge interest on advances against deposits at rate exceeding the PLR.

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In anothermove to provide banks especially the public sector banks more autonomy in order to become more fleet footed, the RBI has said that the board of directors of the banks can authorise the Asset Liability Management Committee to fix interest rates on deposits and advances. This will enable the banks to respond promptly to changes in interest rates environment.An RBI directive issued yesterday said,quot; when an advance is granted against a term deposits the interest rates chargeable shall be equal to the bank8217;s PLR or less. However in cases where deposits rates are equal to or more than PLR or less than one percentage point below PLR, banks will have the freedom to charge suitable rates of interest on advances against such deposits without reference to ceiling of PLRquot;.