RBI Current Affairs

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Forex Reserves reach Life-Time High of $375.71 billion

According to RBI, India’s foreign exchange (Forex) reserves have increased by  $2.985 billion to touch a lifetime high of $375.71 billion in the week that ended on May 5. The increase was due to increase in foreign currency assets (FCAs). The reserves had increased by $2.474 billion to $351.53 billion in the previous week.

Components

The components of India’s Foreign Exchange Reserves include: Foreign currency assets (FCAs), Gold, Special Drawing Rights (SDRs) and RBI’s Reserve position with International Monetary Fund (IMF).

Out of all the components, FCAs constitute the largest component of the Forex Reserves. FCA rose by $2.474 billion to $351.53 billion in the reporting week. FCAs consist of US dollar and other major non-US global currencies. It also comprises of investments in US Treasury bonds, bonds of other selected governments, deposits with foreign central and commercial banks. FCAs include with them the effects of appreciation or depreciation of non-US currencies like the euro, pound, and the yen and is expressed in terms of dollars.

The gold reserves  increased $569.9 million to $20.438 billion. SDRs’ value decreased marginally by $0.4 million to $1.459 billion. RBI’s reserve position with the IMF declined $58.4 million to $2.288 billion.

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RBI tightens Rules for JLFs

The Reserve Bank of India (RBI) has tightened the rules around making the Joint Lenders’ Forum (JLF) more effective, directing banks not to break any rules and to meet all deadlines. The RBI has said that any breach of rules would attract a monetary penalty.

JLFs are meetings held to revitalise stressed assets. In JLF banks attempt to red-flag stress early and check them by putting in place a corrective action plan (CAP).

Need

JLFs inefficiency basically stems out from the disagreements between lenders.The entire model of JLF is based on the premise that collective action of banks against a borrower for recovery. However, in reality, different lenders have different levels of comfort or discomfort, based on the exposure, collateral, etc. Many lenders have also complained about the lack of transparency in JLF.

Salient Highlights

As per the new norms, RBI has lowered the threshold needed for implementing the corrective action plan (CAP). Now, the decisions agreed to by a minimum of 60% of creditors by value and 50% of creditors would now be valid to implement the CAP.

Once a decision is reached by the JLF, it would be binding on all other lenders and they must implement it without any additional conditionalities. However, if a lender wants to exit by exercising the substitution option but failed to exit within the given time, it has to go along with the decision taken.

RBI has asked all banks to ensure their representatives on the JLF to be armed with appropriate mandates. It has also asked the executives to take an unambiguous and unconditional stand and vote accordingly. As per the new norms, the executives after taking the decision should be suitably empowered to implement them without necessitating any board approvals.

The CAP can include resolution through the flexible structuring of project loans, change in ownership under strategic debt restructuring or scheme of the sustainable structuring of stressed assets.

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Forex Reserves Touch Life Time High of $372.73 billion

According to the Reserve Bank of India’s weekly statistical supplement, India’s foreign exchange (Forex) reserves have increased by $1.594 billion to touch a lifetime high of $372.73 billion in the week that ended on April 28. The increase was due to increase in foreign currency assets (FCAs), The reserves had increased by $1.250 billion to $371.14 billion in the previous week.

Components

The components of India’s Foreign Exchange Reserves include:

  • Foreign currency assets (FCAs)
  • Gold
  • Special Drawing Rights (SDRs)
  • RBI’s Reserve position with International Monetary Fund (IMF)

FCAs constitute the largest component of the Forex Reserves. FCA surged $1.569 billion to $349.055 billion in the reporting week. FCAs consist of US dollar and other major non-US global currencies. It also comprises of investments in US Treasury bonds, bonds of other selected governments, deposits with foreign central and commercial banks. FCAs include with them the effects of appreciation or depreciation of non-US currencies like the euro, pound, and the yen and is expressed in terms of dollars.

The gold reserves stand at $19.869 billion. SDRs’ value has increased $8.5 million to reach $1.460 billion. RBI’s reserve position with the IMF also increased by $15.8 million to reach $2.347 billion.

 

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