IC reserves shoot up to IRs 58b
KATHMANDU, SEP 13 -
With the Nepal Rastra Bank (NRB) adopting a policy to maintain relatively higher stock of Indian currency than usual, the country’s IC reserves have risen sharply as of August-end.
According to NRB Deputy Governor Maha Prasad Adhikari, the IC reserves have touched IRs 58 billion mark as of August-end against the usual IRs 20-25 billion.
The central bank adopted such a policy a few months keeping in mind the rising trade dependency as well as trade deficit with India. Nepal’s trade dependency with India has been growing rapidly which is evident with the fact that the country’s trade with the southern neighbour India reached 66.4 percent of the total external trade in FY 2010-11, according to NRB. The figure was at 59.1 percent in FY 2009-10 and 57.1 percent in FY 2008-09.
“Growing trade dependency with India has forced us to maintain higher stock of IC,” said Adhikari. Nepal’s trade deficit with India stands at as high as Rs 218.28 billion, a rise of 23.2 percent in FY 2010-11 compared to previous year. “Such a huge trade deficit has suggested us that having even more IC stock won’t create problem,” said Adhikari.
The central bank is also considering revising the policy on regular stock of IC. As per the current NRB policy, it maintains minimum IC reserves of IRs 25 billion.
The central bank usually invests such minimum IC reserves in Indian treasuries so that the amount always remains as the country’s permanent reserve. The minimum reserve doesn’t include the amount required for day-to-day operations of the country’s monetary transactions. “Now, we are mulling to increase the size of the minimum IC reserves,” said Adhikari.
Lately, NRB has also increased the frequency of IC purchases from India. The central bank has been purchasing IC from Indian banks three to four times a month lately, compared to only twice in the past, according to NRB officials.
At a time, central bank purchases IC by selling $20 million. Nepal purchased IC worth IRs 123.84 billion by selling $2.74 billion in FY 2010-11. NRB had purchased IRs 102.09 billion by selling $2.19 billion in FY 2009-10.
The NRB has also requested its Indian counterpart-the Reserve Bank of India (RBI)-to open its window for purchasing Nepal’s US dollar reserves in exchange of Indian currency. If RBI opens the window, NRB can sell its dollars to the Indian central bank in case it is unable to find better exchange rate in the Indian market.
NRB had proposed the Indian central bank formally in this regard a month ago when Nepali officials visited the Indian central bank as well as during the recent Nepal visit of RBI governor D Subbarao.
Source: Kantipur
With the Nepal Rastra Bank (NRB) adopting a policy to maintain relatively higher stock of Indian currency than usual, the country’s IC reserves have risen sharply as of August-end.
According to NRB Deputy Governor Maha Prasad Adhikari, the IC reserves have touched IRs 58 billion mark as of August-end against the usual IRs 20-25 billion.
The central bank adopted such a policy a few months keeping in mind the rising trade dependency as well as trade deficit with India. Nepal’s trade dependency with India has been growing rapidly which is evident with the fact that the country’s trade with the southern neighbour India reached 66.4 percent of the total external trade in FY 2010-11, according to NRB. The figure was at 59.1 percent in FY 2009-10 and 57.1 percent in FY 2008-09.
“Growing trade dependency with India has forced us to maintain higher stock of IC,” said Adhikari. Nepal’s trade deficit with India stands at as high as Rs 218.28 billion, a rise of 23.2 percent in FY 2010-11 compared to previous year. “Such a huge trade deficit has suggested us that having even more IC stock won’t create problem,” said Adhikari.
The central bank is also considering revising the policy on regular stock of IC. As per the current NRB policy, it maintains minimum IC reserves of IRs 25 billion.
The central bank usually invests such minimum IC reserves in Indian treasuries so that the amount always remains as the country’s permanent reserve. The minimum reserve doesn’t include the amount required for day-to-day operations of the country’s monetary transactions. “Now, we are mulling to increase the size of the minimum IC reserves,” said Adhikari.
Lately, NRB has also increased the frequency of IC purchases from India. The central bank has been purchasing IC from Indian banks three to four times a month lately, compared to only twice in the past, according to NRB officials.
At a time, central bank purchases IC by selling $20 million. Nepal purchased IC worth IRs 123.84 billion by selling $2.74 billion in FY 2010-11. NRB had purchased IRs 102.09 billion by selling $2.19 billion in FY 2009-10.
The NRB has also requested its Indian counterpart-the Reserve Bank of India (RBI)-to open its window for purchasing Nepal’s US dollar reserves in exchange of Indian currency. If RBI opens the window, NRB can sell its dollars to the Indian central bank in case it is unable to find better exchange rate in the Indian market.
NRB had proposed the Indian central bank formally in this regard a month ago when Nepali officials visited the Indian central bank as well as during the recent Nepal visit of RBI governor D Subbarao.
Source: Kantipur
