The Hindu Business Line : `No evidence to relate arbitrage to higher forex'

THE Reserve Bank of India on Monday said there is no evidence to show that ``arbitrage'' has contributed to the higher accretion of foreign exchange reserves in 2002-03.

Fresh accretion to the reserves during the nine months (April-December 2002) has been to the tune of $15.9 billion.

A substantial portion of this has been by way of current account surplus, non-debt creating flows and currency valuation, the central bank said while releasing the latest figures indicating the sources of forex inflows.

There has been a net increase of $2.3 billion in NRI deposits. The figure has been the same during the corresponding period of last year. ``Thus, there is no evidence of arbitrage having contributed to higher accretion of reserves in the current year,'' RBI said in a statement.

Interestingly, of the total accretion of $5.7 billion in the same period in the previous year (April-December 2001), NRI deposits were $2.3 billion, nearly 50 per cent. While the actual NRI inflows remain the same at $2.3 billion in 2002, it accounts for only 14.5 per cent of the total addition to the reserves.

Changes in currency valuation, reflecting the appreciation of the Euro, GBP and yen against the dollar, account for about $3.2 billion accretion to the total reserves in 2002.

Since the debt creating flows are relatively low, the cost of additional reserves is not likely to be very significant.

Country's total foreign exchange reserves as on March 28 stood at $74.805 billion.

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