MUMBAI, February 7: The Reserve Bank of India's foreign exchange reserves increased by $717 million to $27.83 billion for the week ended January 29, 1998. This was primarily due to rise in foreign-currency assets to the tune of $659 million. Foreign-currency assets on January 29 stood at $24.45 million, up from $23.80 million on January 23.Ever since the central bank announced a tight money policy on January 16, the foreign exchange reserves have been on the rise. The reserves have increased by nearly $1 billion over the last fortnight.
RBI's forex reserves started picking up during the fortnight ended January 23, when reserves grew by $369 million to $23.8 billion. Reserves have started moving up after the RBI started buying dollars in the spot market to prevent the appreciation of the rupee against the greenback.
The rupee has strengthened from Rs 40.4 on January 16 to Rs 38.65-70 on February 6. Forex reserves declined in four successive weeks beginning December 26, 1997 when foreign currency assetsaggregated $24.17 billion.
Thereafter, assets declined to $24.06 billion on January 2, $23.72 billion on January 9 and $23.43 billion at the time the central bank announced the hike in bank rate and cash reserve ratio.
Analysts attributed the rise in the forex reserves to the RBI intervention in the forward market. The Reserve Bank on January 23 started entering into buy/sell swaps with banks. Through this, the apex bank bought spot dollars from the banks and sold dollars in the forwards, in a bid to cool the forward markets. This was reversed on February 3 after liquidity in the system saw speculators mounting an attack on the rupee.
Money supply during the fortnight ended January 16 went up to touch 16.6 -- up from 15.5 in the previous fortnight. This can be attributed to the fact that the net foreign exchange assets of the banking sector which stood at 22.8 per cent during the fortnight ended January 2, grew to 23.6 per cent for the fortnight ended January 16.
Net bank credit during the fortnightended January 16 stood at Rs 3,00,940 crore, up from Rs 2,93,461 crore on December 26, indicating a rise of 2.3 per cent. Aggregate deposits during the same period grew to Rs 5,64,580 crore, registering a 1 per cent rise in the fortnight.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
