India's central bank has increased the ratio of its rising foreign exchange reserves invested in foreign bonds but has cut deposits held with foreign banks, it said in its half-yearly report.
The Reserve Bank of India (RBI) invested $36 billion in overseas bonds, three-fifths of its $60 billion increase in its reserves for the six months ended March 2008, according to the central bank's report on foreign exchange reserves.
The percentage of its currency reserves invested in sovereign bonds rose to 34.4 percent from 27.9 percent six months earlier.
But the amount of reserves it held with foreign commercial banks as deposits and with external asset managers shrunk to $6 billion at end-March 2008 from $35.4 billion six months ago.
Deposits with other central banks, the Bank for International Settlements and the International Monetary Fund rose by $52 billion, said the report available on www.rbi.org.in. India's total reserves grew 25 percent in 2007/08, and have remained largely steady since then and stood at $308.5 billion in early July. Analysts say the steady reserves largely reflect the central bank's dollar selling intervention to prop up the rupee in the last few months. India's foreign exchange reserves are the third-largest holdings in Asia behind China and Japan.
India's economy, which grew 9.0 percent in 2007/08, has attracted foreigner investors to its markets and industries, and their demand for rupees has pushed the currency to nine-year highs against the dollar. But the central bank and most analysts expect growth to moderate this year. Foreign direct investment rose to $15.5 billion in 2007/08 from $8.5 billion a year earlier, the RBI said.