India’s holding of US govt securities hits record high of $177.5 billion in February

By: |
April 26, 2020 12:16 PM

In the last one year since February 2019, the overall holding of India has jumped by a staggering USD 33.2 billion.

India, US govt securities, US Treasury Department, China, Reserve Bank of India, foreign holdings data, SLRThe Treasury Department releases foreign holdings data on a country-wise basis. (Reuters photo)

Continuing to increase its exposure, India’s holding of US government securities jumped by over USD 13 billion in a month to record high of USD 177.5 billion at the end of February. In the last one year since February 2019, the overall holding of India has jumped by a staggering USD 33.2 billion.

Latest data from the US Treasury Department showed that the amount of securities owned by India has also gone up by the maximum quantum in a span of one month, amid the country slowly hiking the level since November last year when it stood at USD 159.2 billion.

Japan was the largest holder with securities worth over USD 1.268 trillion at February end, followed by China with holdings to tune of USD 1.092 trillion.

At a distant third place was the United Kingdom, which had securities valued at USD 403.2 billion, as per the data.
In terms of holdings, India is at the 13th position. It owned American government securities worth USD 164.3 billion at the end of January, which was also the highest level then, and in December, the same stood at USD 162 billion.

The Reserve Bank of India buys these bonds. The Treasury Department releases foreign holdings data on a country-wise basis. At the fourth place is Brazil (USD 285.9 billion), followed by Ireland (USD 282.7 billion), Luxembourg (USD 260.8 billion), Hong Kong (USD 249.8 billion), Switzerland (USD 243.7 billion), Cayman Islands (USD 219.4 billion), Belgium (USD 218 billion), Taiwan (USD 201.9 billion) and Saudi Arabia (USD 184.4 billion), the data showed.

Dollars and other US government assets began to be among the preferred ones for investments, with the collapse of the gold standard or the Bretton Woods principles in the late 1970s and central banks moved to the fractional reserves system.

Since then, the US dollar/T-bills have been the safest asset class for any central bank, despite getting one of the lowest returns.

Central banks, including the RBI, follow the principle of SLR (Safety, Liquidity and Return) for their investment decisions. Like its counterparts in other countries, the RBI follows the safety first, liquidity second approach and return on investment as the third criteria.

India’s foreign exchange reserves climbed by USD 3.09 billion to USD 479.57 billion in the week ended April 17.
Economies across the globe are facing uncertainties, which have been accentuated with the coronavirus pandemic that has not only snuffed out lakhs of lives but also significantly disrupted economic activities worldwide.

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