RBI’s returns on forex assets plummet

The sharp fall in interest rates abroad has hit the returns on investments made from India’s soaring foreign exchange kitty. Lower inte...

The sharp fall in interest rates abroad has hit the returns on investments made from India’s soaring foreign exchange kitty.

Lower international interest rates during June-July 2002-03 led to a sharp fall in returns on India’s foreign currency assets to 2.8 per cent compared to 4.1 per cent during 2001-02 while that on gold reserves it fell to 0.6 per cent from 0.9 per cent. India’s forex reserves had crossed the $ 104 billion mark, raising questions among several quarters about the falling returns on rising reserves.

The RBI said similar to international practices, the country’s forex reserves were invested in multi-currency, multi-market portfolios as per the existing norms. The returns on forex assets excludes capital gains less depreciation. The RBI disclosed the investments, countries where it invested and the amount invested in various avenues for the first time on Tuesday. As at the end of September end 2003, India’s forex reserves stood at US dollar 91.13 billion, up from $ 5.8 billion as on March end 1991, RBI said in its report released here. On gold reserves, RBI said that it holds 357 tonne, forming about 4.3 per cent of the total reserves as on September 30, 2003. Of this, 65 tonne was held abroad since 1991 in deposits with Bank of England and Bank of International Settlements.

Out of the total foreign currency assets of $ 87.2 billion, $ 31.7 billion was invested in securities, $ 9.6 billion with other central banks and BIS and $ 15.8 billion in the form of deposits with foreign commercial banks.