The ‘RBI’s Half-Yearly Report on Management of Foreign Exchange Reserves’ showed that while foreign currency assets (FCA) remained broadly stable over the four-year period, the composition of investments changed. The share of deposits with commercial banks fell to a low of 4.2% at the end of March 2023 before rising steadily to 7.2% by March-end this year.
Madan Sabnavis, chief economist, Bank of Baroda, said there are a few reasons for this phenomenon. “One the valuation of reserves which went up as a result of holding US treasuries which have seen values rising. Second, there has been a principle of diversification followed. Third, higher returns from deposits kept in commercial banks are reflective of treasury operations,” he said.
India’s total foreign exchange reserves increased to $691.1 billion at the end of March this year from $607.3 billion at March-end 2022.
Of the $691.1 billion in reserves, FCA amounted to $552.8 billion, gold was valued at $115.2 billion, special drawing rights at $18.6 billion and the reserve tranche position in the IMF at $4.8 billion.FCA comprises a multi-currency portfolio of major currencies such as the US dollar, euro, pound sterling and are valued in US dollar terms.Investments made by the RBI in bonds issued by India Infrastructure Finance Company (UK) are excluded from FCA. At the end of March this year, investments in such bonds stood at $400 million, down from $1.44 billion in March 2022.
