?managing India?s Foreign Exchange Reserves?

August 31, 2010 by Prakash Dhawan · Leave a Comment
Filed under: "reserves Rupees" 

?managing India?s Foreign Exchange Reserves?

“MANAGING INDIA’S FOREIGN EXCHANGE RESERVES”

 

Foreign Exchange Reserves (FER) is the surplus money or capital that a country parks or maintains in the foreign country in form of currency, bond and other kind of securities.

 

Foreign exchange reserves are the foreign currency deposits held by national banks of different nations. These are assets of Governments which are held in different hard currencies such as Dollar, Sterling, Euro, Yen, Gold, SDRs. The current FER of India amounts to 1.33 billion as on 14 Oct as declared by the RBI. This amount seems an alien like figure when we look back to the early 90’s when we had just enough reserves to meet our country’s demand for the next two weeks. The total forex reserves have risen from .96 billion in March 1990 to 1.33 billion as on 14 Oct 2007.

 

Movements in Foreign Exchange Reserves (at the end of March)

 

 

 

 

OBJECTIVE:

 

The objectives of my article are as listed below:

 

1.      To study and analyze the current methods RBI uses to manage our FER.

 

2.       Analyze how other countries like China, Abu Dabhai and Singapore with large FER manage their reserves and whether India can also opt for these processes to obtain higher ROI.

 

3.      I would like to list out various other innovative and new options and avenues towards which India can look to which will benefit the country and its people, for getting higher returns on its reserves while minimizing the risk involved; as the primary objective of having a reserve is to provide a cushion in case of any emergency or financial crisis. I would also like to forward these suggestions to the RBI.

 

LITERATURE SURVEY:

 

1. “Determining the Optimum Level of Foreign Exchange Reserves”,

 

By Sajikumar, Treasury Management. The Icfai University Press, November, 2005.

 

The author says that the increase in the inflows of the foreign reserves in the country by the route of ADRs, GDRs, FDIs, ECBs, portfolio investments, non-resident deposits and bank capital raises the question of an ‘optimum’ level of reserves. Further, he discusses about the reserve adequacy indicators: Trade related indicators

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Forex….Trading….Currency Exchange

August 25, 2010 by Prakash Dhawan · Leave a Comment
Filed under: "Currency" 

Forex….Trading….Currency Exchange

Profit Big in Currency Exchange A way of winnig huge profits.Currency exchange is the trading of one currency against another. Professionals refer to this as foreign exchange, but may also use the acronyms Forex or FX.

Currency exchange is necessary in numerous circumstances. Consumers typically come into contact with currency exchange when they travel. They go to a bank or currency exchange bureau to convert their “home currency into , the currency of the country they intend to travel to.

They may also purchase goods in a foreign country or via the Internet with their credit card, in which case they will find that the amount they paid in the foreign currency will have been converted to their home currency on their credit card statement.

Although each such currency exchange is a relatively small transaction, the aggregate of all such transactions is significant. Businesses typically have to convert currencies when they conduct business outside their home country. They exportin goods to another country and receive payment in the currency of that foreign country, then the payment must often be converted back to the home currency.

Similarly, if they have to import goods or services, then businesses will often have to pay in a foreign currency, requiring them to first convert their home currency into the foreign currency. Large companies convert huge amounts of currency each year.

The timing of when they convert can have a large affect on their balance sheet and bottom line.Investors and speculators require currency exchange whenever they trade in any foreign investment, be that equities, bonds, bank deposits, or real estate.

Investors and speculators also trade currencies directly in order to benefit from movements in the currency exchange markets. Commercial and Investment Banks trade currencies as a service for their commercial banking, deposit and lending customers.

These institutions also generally participate in the currency market for hedging and proprietary trading purposes.

Governments and central banks trade currencies to improve trading conditions or to intervene in an attempt to adjust economic or financial imbalances. Although they do not trade for speculative reasons — they are a non-profit organization — they often tend to be profitable, since they generally trade on a long-term basis.

Currency

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