The foreign currency required by the SBI for redemption of Resurgent India Bonds (RIBs) will be sold by the Reserve Bank India (RBI) at the prevailing market rates on the date of maturity to avoid causing any impact of the redemption on the market. The total amount of bonds to be redeemed, inclusive of the interest component, is expected to be of the order of $5.5 billion. RBI has put in place arrangements for redemption of RIBs in close consultation with SBI.‘‘The arrangements have been put in place in order to ensure that redemption of these bonds is done smoothly, in time, and without causing any impact on domestic liquidity, money market or on the foreign exchange market,’’ RBI said. ‘‘It is expected that although RIB redemption is large in magnitude, it will have little or no impact on the domestic markets, including money, foreign exchange and securities markets due to these arrangements,’’ RBI added.RBI would sell foreign currency to SBI primarily out of its forward foreign currency assets, which will fall around the date of redemption. Any balance requirements, which are likely to be relatively small, will be met out of the foreign exchange reserve holdings of RBI by way of outright sales to SBI, RBI said.‘‘The impact of the RBI redemption on India’s current foreign exchange reserves is likely to be relatively small,’’ RBI added. SBI has also taken steps to build up an adequate amount of rupee resources to fund foreign currency purchases from RBI. In case of any additional rupee requirement, RBI would extend the regular reverse-repurchase facilities to SBI. These reverse repurchase transactions will be undertaken as a part of the normal liquidity adjustment facility (LAF) as per the prevailing rate structure, RBI said.
