The Hindu Business Line : FIs holding in US treasury down by over $1 b in April

Data released by the US Treasury Department indicated that Indian holdings in US treasury securities were at $12.3 billion in April this year. At the end of March 2006, the holdings were worth $13.4 billion. Besides the RBI, other institutions holding foreign government securities include the General Insurance Corporation, foreign subsidiaries of Indian banks and foreign branches of domestic banks.

Reasons cited

The drop was largely on account of a reduction in exposures to the US securities markets, bankers said. This was evident from the increase in US banking liabilities to Indian institutions. The liabilities have increased to $14.224 billion in April 2006 from $13.25 billion in March 2006.

The increase was mostly on account of increase in cash balances held with the US banks. This was mostly due to the fact that Indian financial institutions preferred to remain dollar liquid in view of the hardening of US treasury yields. In fact most of the holdings in US treasuries, bankers said were at the short end of the market.

The reduction in US treasury holdings implied that only about 7 per cent of the foreign exchange reserves were held in US securities. In December 2005, investments in US treasuries were as much as 10 per cent of the foreign exchange reserves.

However, bankers said that some of the reserves were now being held in multilateral institution bonds and cash balances with the Bank for International Settlements, UK treasuries and the euro-denominated securities.

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