India holds not more than 50 per cent of its reserves in dollars compared to other emerging markets which hold 59 per cent of their reserves in dollars and the advanced markets, who hold 64 per cent.
In a report on the management of forex reserves by the RBI, Mecklai Financial says it feels that “the reports of the dollar demise as a reserve currency are greatly exaggerated but the fact is that the dollar has been losing ground in terms of its representation in the reserves of central banks.”
Mr Rugved Dhumale, the associate vice-president of Mecklai Financial, says, “this is significant as it indicates that the RBI is responsive to changes in the balance of payments and composition of our reserves.”
According to the report, on September 30, when the International Monetary Fund released its composition of foreign exchange reserves data for the June quarter it shocked the markets as it showed that central banks allocated three times as much money to euros ($123.10 billion) as they did to dollars ($42.87 billion). This threatens the dollar’s primary reserve status appear credible.
The RBI’s stance in reserves allocation has been to protect it own balance sheet against serious valuation losses which last fiscal reached a huge $37.7 billion on total reserves of around $300 billion.