Indias forex reserves since 1991
With the transition to a market-based system for determining the external value of the Indian rupee the foreign forex market in India gained importance in the early reform period. For a long time, foreign exchange in India was treated since a controlled commodity because of its limited availability. The early stages of foreign exchange management in the country focussed on control of foreign exchange by regulating the demand due to its limited supply. Exchange control was introduced in India under the Defence of India Rules on September 3, on a temporary basis. The statutory power reserves exchange control was provided by the Foreign Exchange Regulation Act FERA ofwhich was subsequently replaced by a more comprehensive Foreign Indias Regulation Act, This Act empowered the Reserve Bank, and in certain cases the Central Government, to control and regulate dealings in foreign exchange payments outside India, export and import of currency notes and bullion, transfer of securities between residents and non-residents, acquisition of foreign securities, and acquisition of immovable property in and outside India, among other transactions. Extensive relaxations in the rules governing foreign exchange were initiated, prompted by the liberalisation measures introduced since and the Act was amended as a new Foreign Exchange Regulation Amendment Act Significant developments in the external sector, such as, substantial increase in foreign exchange reserves, growth in foreign trade, rationalisation of tariffs, current account convertibility, liberalisation of Indian investments abroad, increased access to external commercial borrowings by Indian corporates and participation of foreign institutional investors in Indian stock market, resulted in a changed environment. Keeping 1991 view the changed environment, the Foreign Exchange Management Act FEMA was enacted in to replace FERA. FEMA became effective from June 1, The Reserve Bank issues licences to banks since other institutions to act as Authorised Dealers in the foreign exchange market. Since keeping with the move towards liberalisation, the Reserve Bank has undertaken substantial elimination of licensing, quantitative restrictions and other 1991 and discretionary controls. Apart from easing restrictions on foreign exchange transactions in terms of processes and procedure, the Reserve Bank has also provided the exchange facility for liberalised travel abroad for purposes, such as, conducting business, attending international conferences, undertaking technical study tours, setting up joint ventures abroad, negotiating since collaboration, pursuing higher studies and training, and also for medical treatment. Moreover, the Reserve Bank has permitted residents to hold liberal amount of foreign currency. Residents can now also open foreign currency accounts in India and credit specified foreign exchange receipts into it. Foreign investment comes into India in various forms. Following the reforms path, the Reserve Bank has liberalised the provisions relating to such investments. The Reserve Bank has permitted foreign investment in almost all sectors, with a few exceptions. In many sectors, no prior approval from the Government or the Reserve Bank is required for non-residents investing in India. Foreign institutional investors are allowed to since in all equity securities traded in the primary and secondary markets. Foreign institutional investors have also been permitted to invest in Government of India treasury bills and dated securities, corporate debt instruments and mutual funds. Reserves NRIs have the flexibility of investing under the options of repatriation and non-repatriation. Similarly, Indian entities can also make investment in an overseas joint venture or in a wholly-owned subsidiary abroad upto a forex limit. Foreign Currency Convertible Indias FCCBs and Foreign Currency Exchangeable Bonds FCEBs are also governed by the ECB guidelines. As a step towards further simplification and liberalisation of the foreign exchange reserves available to the residents, the Forex Bank has permitted resident individuals to freely remit abroad up to liberal amount per financial year for since permissible purposes. Exchange-traded currency futures are permitted in India. Such trading facilities are currently being offered by the National Stock Exchange, the Bombay Stock Exchange and the MCX-Stock Exchange. As the product is exchange traded, the conduct of currency futures trading facility is being regulated jointly by the Reserve Bank and the Securities and Exchange Board of India. The period after independence indias marked by a fixed exchange rate regime, which was in line 1991 the Bretton Woods system prevalent then. The Indian Rupee was pegged to the Pound Sterling on account of historic links with Britain. A significant two-step downward reserves in the exchange rate of the Rupee was made in In MarchLiberalised Exchange Rate Management System LERMS involving the dual exchange rate was instituted. A unified single market-determined exchange rate system based 1991 the demand for and supply of foreign exchange replaced the LERMS effective March 1, For the purpose, forex closely monitors the developments in reserves financial markets at home and abroad. When necessary, it intervenes in the market by buying or selling foreign currencies. Forex market operations are undertaken either directly or through public sector banks. In addition to the traditional instruments like forward and swap contracts, the Reserve Bank has facilitated increased availability of derivative instruments in the foreign exchange indias. It has allowed trading in Rupee-foreign reserves swaps, foreign currency-Rupee options, cross-currency since, interest rate swaps and currency swaps, forward rate agreements and currency futures. The legal provisions governing management of forex exchange reserves are laid down in the Reserve Bank of India Act, First, the share of foreign currency assets in the balance sheet of the Reserve Bank has substantially increased. Second, with the increased volatility in exchange indias interest rates in the global market, the task of preserving the value of reserves and obtaining a reasonable return on them forex become challenging. The Reserve Bank of India Act permits the Reserve Bank to invest the reserves in the following types of instruments: While safety and liquidity continue to be the twin-pillars of reserves management, return optimisation has become an embedded strategy within indias framework. The Reserve Bank has framed 1991 guidelines stipulating stringent eligibility criteria for issuers, counterparties, and investments to be made with them to enhance the safety and liquidity of reserves. The Reserve Bank, in consultation with the Government, indias reviews the reserves management strategies. Since aims at facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange 1991 in India. Emphasising the shift in focus, the Reserve Bank in due course also amended since January 31, the name of its department dealing with the foreign exchange transactions to Foreign Exchange Department from Exchange Control Department. Skip to main content. Search the Website Search. Home About Us Notifications Press Releases Speeches Publications Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Lectures Statistics Data Releases Database on Indian Economy. Liberalised Approach The Reserve Bank issues licences to banks and other institutions to act as Authorised Dealers in the foreign exchange market. Foreign Investment Foreign investment comes into India in various forms. Liberalised Remittance Scheme As a step towards further simplification and liberalisation of the foreign exchange facilities available to the residents, the Reserve Bank has permitted resident individuals to freely remit abroad up to liberal amount per financial year for any permissible purposes. Currency Futures Exchange-traded currency futures are permitted in India. Legal Framework Reserve Bank of India Act, Foreign Exchange Management Act, Events Public Speaking Engagements RBI Clarifications Right to Information Act Related Links. RBI's Core Purpose, Values and Vision Citizens' Charter Indias for Regulatory Approvals Complaints Contact Us. Follow RBI RSS Twitter Videos. The two most important features 1991 the site are: One, in addition to the default site, the refurbished site also has all the information reserves functionwise; two, a much improved search — well, at least we think reserves but you be the judge. With this makeover, we also take a small step into social media. We will now use Twitter albeit one way to send out alerts on the 1991 we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy. The site can be accessed through most browsers and devices; it also meets accessibility standards. Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank. Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of forex refurbished site.
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