The foreign exchange reserves dipped by $271 million to touch $24 billion on January 3, 1997 on account of repayments to the International Monetary Fund (IMF). These were made on December 30, 1996.
Apart from the repayments, a sharp fall in the international prices of gold lead to a decline in forex reserves. The Reserve Bank of India (RBI) periodically revalues its gold reserves to mark it to the market. The value of the yellow metal held by central bank stood at $4.246 billion on January 3, 1997, a fall of $101 million from the December 27, 1996 figure of $4.347 billion.
The special drawing rights (SDRs) also dropped to $6 million on January 3, 1997 from $122 million on December 27, 1996. The foreign currency assets also dipped to $19.74 billion on January 3, 1997 from $19.80 billion on December 27, 1996.
Apart from the IMF repayments, outflows on account of FCNR (A) deposit redemptions have also depleted the reserves. The Reserve Bank of India bears the exchange risk on these NRI deposits. Bankers point out that the reserves have borne the brunt of repayment quite well. There are two reasons for this. One, the Reserve Bank has been intervening in the market to shore up its reserves, while preventing the rupee from appreciating.
Two, the FCNR (A) liabilities which were expected to flow out of the country are being converted to FCNR (B) deposits, NRE or NRNR deposits. This has reduced the pressure on the reserves.
The incremental ad hoc treasury bills showed a negative growth on December 27, 1996 over the March 31, 1996 figure. On December 29, 1996 the incremental ad hocs stood at Rs 1,990 crore.
The total outstanding ad hocs on December 27, 1996 stood at Rs 29,215 crore as against Rs 32,900 crore on December 20, 1996. The on-tap bills held by banks on December 27, 1996 was nil but the corresponding figure in the case of the 91-day treasury bills was Rs 2,303 crore.
However, state government and provident funds held Rs 4,597 crore and Rs 476 crore worth of on-tap bills respectively. State governments held Rs 1,533 crore worth of bills purchased from auctions.
The massive fall of Rs 4,261 crore in the net RBI credit to the government led to a sharp contraction of reserve money. The RBI credit to the government stood at Rs 1,26,081 crore on December 20, 1996. The decline resulted in the Reserve money shrinking by Rs 3,100 crore to Rs 1,90,118 crore during the week ended December 20, 1996.
However, among the other sources of reserve money, the RBI credit to banks and the commercial sector rose by Rs 543 crore to touch Rs Rs 12,933 crore. On the other hand, net foreign exchange assets rose by Rs 690 crore to touch Rs 85,242 crore for the week ended December 20, 1996. Money supply, however, rose by Rs 588 crore to touch Rs 6,58,930 crore for the fortnight ended December 20, 1996.
