India’s reserves adequacy improved to 18.6 months in December 2020

India’s import cover improved to 18.6 months at the end of December 2020, from 17.1 months at end-September 2020, the central bank said in its half yearly report on foreign exchange management.

The ratio of short-term debt to reserves, which was 18.9 per cent at end-September 2020, declined to 17.7 per cent at end-December 2020. The ratio of volatile capital flows (including cumulative portfolio inflows and outstanding short-term debt) to reserves declined from 68.0 per cent to 67.0 per cent in the same period, the central bank said in its half yearly report on management of

As at end-March 2021, the RBI held 695.31 metric tonnes of Of this, 403.01 metric tonnes of were held overseas with the Bank of England and the Bank of International Settlements (BIS), and 292.30 tonnes of was held domestically.

In value terms (USD), the share of gold in the total decreased from about 6.69 per cent as at end-September 2020 to about 5.87 per cent as at end-March 2021. During this period, increased from $544.69 billion to $576.98 billion.

The RBI reserves are maintained in various major currencies, such as US dollar, Euro, Pound sterling, Japanese yen, etc, but are denominated and expressed in dollars. Movements in the foreign currency assets 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.


Excluding valuation changes, foreign exchange reserves increased by $83.9 billion during April-December 2020 as compared with $40.7 billion during April-December 2019.

Including valuation changes, the reserves increased by $108.0 billion from $47 billion in the same period under consideration.

“The valuation gain, reflecting the depreciation of the US dollar against major currencies and increase in gold prices, amounted to $24.1 billion during April-December 2020 as compared with $6.3 billion during April-December 2019,” the RBI said in its report.

Between December 2019 and December 2020, India’s external assets increased by $154.2 billion and external liabilities increased by $69.7 billion. The net International Investment Position (IIP) was negative at $340.6 billion as against a negative net IIP of $425.1 billion in the same period.

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