The Reserve Bank of India (RBI) has signed an agreement with the International Monetary Fund (IMF) to purchase notes worth up to $10 billion to improve the ability of the international lender to provide timely and effective balance-of-payment assistance to member countries.
IMF will issue the notes in the special drawing rights (SDR)-denominated form. The pact was a temporary bilateral arrangement for one year, which might be extended to two years, RBI said on Friday.
The pact is part of the international effort to support IMF’s lending capacity following the decision of the Group of 20 nations at its London Summit (held in April 2009) to treble IMF’s resources to $750 billion.
Generally, IMF will give a five-day notice to RBI about its intention to issues notes, including the amount. It will restrict issuance to a principal amount not exceeding SDR 500 million in any calendar week.
At the beginning of each quarter, IMF will also provide estimates for the amount for which notes will be issued during a three-month period.
Permanent increases in IMF’s resources are expected to take place through an increase in quotas and standing borrowing arrangements currently under negotiation.