Forex reserves down to $311.5 bn as on Sept 30, 2011

Written by fe Bureau | Mumbai | Updated: Feb 29 2012, 09:07am hrs
The countrys foreign exchange reserves stood at $304.8 billion as at end-March, 2011, and increased to the peak level of $322.0 billion as at end-August, 2011, the Reserve Bank of India (RBI) said on Tuesday.

Thereafter, it came down to $311.5 billion at the end of September 2011, the RBI said in a release. The main reasons of decline are, inter alia, the revaluation effect and intervention in the domestic foreign exchange market.

As at end-September 2011, out of the total foreign currency assets of $ 275.7 billion, $ 144.4 billion was invested in securities, $ 125.8 billion was deposited with other central banks, BIS and the IMF and $ 5.5 billion was placed with the External Asset Managers.

The RBI held 557.75 tonne of gold forming about 9.2% of the total foreign exchange reserves in value terms as on September 31, 2011. Of these, 265.49 tonne are held abroad in deposits/safe custody with the Bank of England and the Bank for International Settlements. On adequacy of reserves, the RBI observed that one such measure requires that the usable foreign exchange reserves should exceed scheduled amortization of foreign currency debts (assuming no rollovers) during the following year.

By September-end 2011, the import cover declined to 8.5 months from 9.6 months at end-March 2011. The ratio of short-term debt 1 to the foreign exchange reserves, which was 21.3% at end-March 2011 increased to 23% at end-September 2011. The ratio of volatile capital flows (defined to include cumulative portfolio inflows and short-term debt) to the reserves increased from 67.3% as at end-March 2011 to 68.3% as at end-September 2011.

Adequacy of reserves has emerged as an important parameter in gauging the ability to absorb external shocks. With the changing profile of capital flows, the traditional approach of assessing reserve adequacy in terms of import cover has been broadened to include a number of parameters which take into account the size, composition and risk profiles of various types of capital flows as well as the types of external shocks to which the economy is vulnerable, the RBI said.