Mumbai, Oct 10 (IANS) Increased inflows of foreign funds and rise in value of gold reserves added $827.4 million to India’s foreign exchange (Forex) kitty, experts said on Saturday.
Overall, the Forex reserves stood at $350.80 billion for the week ended October 2.
“The Reserve Bank of India (RBI) decision to allow greater access to foreign funds to invest in government backed bonds was one of the reason for the rise in the Forex reserves,” Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services told IANS.
On September 29, the RBI had said that it intended to provide a more predictable regime for investment by foreign funds and decided to raise their exposure limits in phases in central government securities to 5 percent of the outstanding stock by March 2018.
In another key decision, the central bank had set a separate limit for investment by such funds in state development loans, which are to be increased in phases to reach 2 percent of the outstanding stock by March 2018.
The RBI’s decision is expected to usher in around $2.5 billion by this fiscal end.
In the same week, the Supreme Court’s verdict in favour of Mauritius-based foreign fund Castleton Investment restored confidence of foreign portfolio investors (FPIs) in Indian tax regime.
The verdict shed more clarity over the applicability of minimum alternate tax (MAT) on FPIs. This smoothen nerves of anxious foreign investors.
Previously, the reserves had declined by $2.04 billion to $349.97 billion in the week ended September 25.
Furthermore, the data furnished by the RBI in its weekly statistical supplement showed that the foreign currency assets (FCAs) had gained by $717.6 million to $327.29 billion in the week under review.
The FCA constitutes the largest component of India’s forex reserves. It consists of US dollars, major non-dollar currencies, securities and bonds bought abroad.
Another currency analysts said that the in week under review there was a subsequent weakness in the US dollar against major currencies.
The Indian reserves consist of nearly 20-25 percent of the non-dollar currencies. The individual movements of these currencies against the dollar impacts the overall reserve value.
“The FCA expressed in US dollar terms includes the effect of appreciation or depreciation of non-US currencies such as the pound sterling, euro and yen held in reserve,” the RBI said in its statistical supplement.
During the week under review, the country’s gold reserves rose by $116.5 million to $18.15 billion. The country’s gold reserves had depleted by $214.8 million to $18.03 billion during the week ended September 4.
The special drawing rights (SDRs) in the week under review were lower by $1.7 million at $4.04 billion.
The country’s reserve position with the International Monetary Fund (IMF) also edged down by $5.00 million to $1.31 billion.