The dollar holdings in Indias foreign exchange reserves are probably around 50 per cent as the Reserve Bank of India has diversified reserves in favour of non-dollar currencies as the trend is globally.

The RBI appears to have been one of the leading central banks in this diversification away from the falling dollar. Our analysis suggests that India holds not more than 50 per cent of its reserves in dollars, as against 59 per cent for other emerging markets (where the allocation has been disclosed) and around 64 per cent for the advanced markets, said Jamal Me­cklai, chief executive at Mecklai Financial Services, a leading foreign exchange consulting firm.

Within the overall ambit of safety and liquidity, RBI has had to take a very pro-active stance in reserves allocation to protect its own balance sheet against potentially serious valuation losses, which last fiscal reached a huge $37.7 billion, he pointed out.

Mecklai Financial said a statistical analysis of valuation changes in the reserves since 2006 suggests that the non-dollar holdings in Indias reserves are of the order of around 50 per cent.

We estimate that RBI has diversified its reserves to where it probably holds 50 per cent in dollars, about 35 per cent in euros, 5 per cent in yen, 3 per cent in sterling and a surprisingly large 7.26 per cent in non-SDR (special drawing rights with International Monetary Fund) currencies, like Swiss francs (CHF), Australian dollar (AUD) and the Canadian dollar (CAD).

It said there appears to be several other rationales that the RBI is following in allocating its reserves. Perhaps the most striking aspect of the currency break-up of Indias reserves is the substantial share of non-SDR currencies.

The RBI has been quite aggressive in diversifying its reserves since as far back as 2003-04, when it increased its allocation to non-SDR currencies from just $50 million to $2.82 billion. Today, India holds nearly 7.5 per cent of reserves in non-SDR currencies (as compared to around 2 per cent in developed economies). Perhaps, not coincidentally, this is about the ratio of non-SDR currencies in Indias trade basket, Mecklai said.

The accumulated net gain in the currency and gold revaluation account, however, had increased in the year ended June 30, 2009 to Rs 1,98,842 crore from Rs 1,63,211 crore a year earlier.