The Reserve Bank of India (RBI) will redesignate part of its foreign exchange reserves as euros once the Europes single currency is launched. According to a senior official with Reserve Bank, the apex bank would be changing composition of the forex reserves.
According to analysts, the crucial question before Reserve Bank would be how much of its reserves it should hold in euros. Indias foreign currency reserves stood at $29.33 billion as on April 24, 1998. The euro is expected to emerge as a stronger currency vis a vis the dollar. At present RBI maintains, its reserves in various currencies, but with a dollar bias. The currency used by the Reserve Bank to intervene in the forex market is dollars.
As a matter of risk management policy, we already have a multi-currency basket for our reserves including several European currencies besides the US dollar. Once the euro comes into being, all these currencies will naturally converge on to it. These currencies will automatically be redesigned as euro,
