India's foreign exchange reserves crossed the $28 billion mark to touch $28.13 billion on May 30. They have increased by $1.7 billion during the first two months of the 1997-98 fiscal and on a year to year basis the jump in the reserves is by $6.5 billion.
The Reserve Bank of India's continued dollar sterilisation operations in a bid to keep the Indian currency from gyrating has expanded the reserves.
Despite the political turmoil witnessed during March-end and early April due to fall of the Central government and continuing sluggish capital markets, India is on the buy list of several foreign investors. Even the Rs 1,200-crore CRB scam does not seem to have dampened the investment spirit, the green back continues to stream into the country, said a forex dealer with a foreign bank.
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The $345-million jump in foreign currency reserves is due to the expansion in foreign currency assets which went up to $24.16 billion - an increase of $345 million. The gold stock remained unchanged at $3.9 billion, the stock of Special Drawing Rights was $3 million.
However, the RBI's persistent open market operations in mopping up the dollars is infusing liquidity in the banking system resulting in the expansion of broad money (M3).
During the fortnight ending May 9, M3 increased by one per cent, that is by Rs 6,823 crore, to Rs 7,18,139 crore. Further, the M3 expansion during the current fiscal till May 9, that is in six weeks, is by 2.9 per cent or Rs 20,083 crore.
Meanwhile, aggregate deposits grew by Rs 1,640 crore during the fortnight ended May 23 to stand at Rs 5,13,675 crore. Easing of interest rates continues to move depositors from demand to time deposits.
Demand deposits declined by Rs 352 crore to Rs 85,047 crore and time deposits expanded by Rs 1,992 crore to touch Rs 4,28,630 crore. Commercial or non-food credit continues to move downward. It has fallen by Rs 2,150 crore to Rs 2,68,105 crore during the period ended May 23 as against a fall of Rs 299 crore on May 9.
However, the news of a tenth consecutive good monsoon has resulted in robust agricultural activity.
Farmers seem to have capitalised on the weather bureau reports and availed good credit to reap a bumper harvest, say bankers.
Even the RBI statistics support their view -- food credit continues to expand. It increased by Rs 1,506 crore to Rs 9,453 crore on May 23.
Sheen on gilts continues to attract banks. Investment in government securities increased by nearly one per cent in a fortnight.
Investments in government stock went up by Rs 1,841 crore to Rs 1,69,498 crore on May 23.
This apart, bank investments in other approved securities have also moved up marginally, by Rs 73 crore, to Rs 32,062 crore, taking the total investment portfolio of the banking segment to Rs 2,01,561 crore.