The Hindu : RIBs redemption: `no major impact on forex market'

Online edition of India's National Newspaper
Friday, Sep 19, 2003

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RIBs redemption: `no major impact on forex market'

By Our Special Correspondent

MUMBAI SEPT. 18. The Reserve Bank of India today stated that it will be infusing rupee liquidity into the market on account of purchase of forward foreign currency assets and this will, to a great extent, neutralise the rupee outgo from State Bank of India to the RBI for purchasing the foreign exchange required for the forthcoming redemption of Resurgent India Bonds (RIBs).

The RIBs are due for redemption on October 1 and are expected to be equivalent of $5.5 billion. The RIBs were floated by SBI in August 1998. It had collected $4.23 billion and the entire RIB corpus was sold to the RBI at the prevailing market exchange rate.

As a consideration, SBI was paid Rs. 18,123 crores. About 94.25 per cent of the corpus was in U.S. dollar and the remaining in pound sterling and Euro (then DEM).

Most of the foreign exchange required for redemption will be met by the RBI directly (out of forward purchases already in place) and the balance requirements of SBI will be provided by the RBI from out of its own resources. "Thus no cognisable impact is anticipated on the foreign exchange market,'' stated the RBI, adding, "the arrangements put in place by RBI-SBI are expected to ensure smooth conduct of operations in the money and foreign exchange markets though large value/volume transactions may be condensed in a few days.''

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