The central bank is mandated to invest small portion of its foreign exchange reserves- $ 5 billion in the company following demands from the government in the past to fund infrastructure.
The 's in the state-owned () fell by a fifth from a year earlier to $932 million in FY’2023-24, according to the latest Half Yearly Report on Management of Foreign Exchange Reserve released on Monday.The central bank is mandated to invest small portion of its foreign exchange reserves- $ 5 billion in the company following demands from the government in the past to fund infrastructure.
The had announced that, with a view to further supplementing financial resources for in India, an of would be set up.
The company would borrow funds from the RBI and lend to Indian companies implementing projects in India, or to co-finance their External Commercial Borrowings for such projects, solely for capital expenditure outside India. RBI’s investment in the company is through subscription of bonds issued by the company.
Though the proposal was not initially acceptable to the central bank then, it was subsequently decided to carve out $5 billion of the reserves to invest in the subsidiary of IIFC.
The report also highlighted that during the half-year period under review, reserves increased from $ 587.71billion as at end-September 2023 to $ 646.42 billion as at end-March 2024.
On a balance of payments basis (i.e., excluding valuation effects), increased by $ 32.9 billion during April-December 2023 compared to the reduction of $ 14.7 billion during April-December 2022. Foreign exchange reserves in nominal terms (including valuation effects) increased by $ 44 billion during April-December 2023 as against a decrease of $ 44.6 billion in the corresponding period of the preceding year.
Although both US dollar and Euro are intervention currencies and the Foreign Currency Assets (FCA) are maintained in major currencies, the foreign exchange reserves are denominated and expressed in US dollar terms.
Movements in the FCA occur mainly on account of purchase and sale of foreign exchange by the RBI, income arising out of the deployment of the foreign exchange reserves, external aid receipts of the Central Government and changes on account of revaluation of the assets.
Source: Stocks-Markets-Economic Times