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Forex reserves swell $2 billion
June, 02nd 2008

Foreign exchange reserves rose $2 billion during the week ended May 23, though the central bank sold dollars during the week to meet importers demand.

According to the latest figures released by the Reserve Bank of India in its weekly statistical supplement (WSS), total foreign exchange reserves including gold and special drawing rights (SDR) rose $2,090 million during the week ended May 23.

Almost the entire growth in reserves during the week has been on account of the growth in foreign currency assets which went up $2,085 million. Reserves with the IMF rose $5 million, though the value of SDRs and gold in reserves remained unchanged during the week.

The central bank reportedly sold dollars during the week to meet oil importers demand. Besides, the dollar also strengthened vis-a-vis major currencies during the week. However, foreign currency assets expressed in dollar terms also includes the effect of appreciation/depreciation of non-dollar currencies (such as euro, sterling, yen) held in reserves.

The $2 billion pile up in reserves has resulted in infusion of rupee funds worth Rs 15,044 crore during the week. Though that helped ease liquidity conditions during the week, it tightened in the subsequent week.

But, the reserve money of which foreign currency assets is a major sources dipped Rs 42,439 crore during the week on account of a Rs 44,176 crore dip in the net RBI credit to the government during the week.

In the other developments, the government did not resort to any ways and means advances (WMA) temporary overdraft to meet revenue mismatches during the week. States have reduced their reliance on WMA by Rs 215 crore taking the WMA outstanding with the central bank to Rs 303 crore as on May 23.

The government on the other hand has pulled out surplus funds amounting to Rs 6,600 crore from RBI during the week. Its outstanding surplus with RBI is now to the minimum at Rs 101 crore.

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