RBI no to opening shrinking forex chest to banks and FIs

NEW DELHI: The Reserve Bank India (RBI) has rejected a request to directly lend US dollars from the country���s foreign exchange reserves to financial institutions, as it is unwilling to further deplete reserves already down 20% from end-March levels, government officials say.

The RBI stance comes in the wake of a request from the Export-Import Bank of India (Exim Bank) for a direct dollar credit line to meet its lending commitments. Exim Bank has traditionally raised funds overseas, but this source of funding has become more difficult to tap amid the global credit crunch.

A finance ministry official told ET that Exim Bank had requested RBI to provide it with a special window for borrowing from the foreign exchange reserves, and has also sought an increase to its borrowing limit from other global banks and financial institutions.

For instance, Exim Bank wanted RBI to extend its borrowing limit from the European Investment Bank (EIB) to $150 million from $100 million now.

���While RBI has refused to extend any support from its dollar reserves, it has agreed to allow Exim Bank borrow more money from the EIB,��� the official, who did not wish to be named, said.

Both RBI and Exim Bank did not reply to emails seeking comment. Exim Bank provides credit to exporters, importers and to Indian companies planning investments overseas. The specialist lender also lends funds to overseas financial institutions and foreign governments, which, in turn, provide support to the Indian companies planning investment in their countries.

RBI, which manages the country���s reserves, has seen foreign currency assets in the reserves fall to $236.9 billion for the week to November 21 from around $300 billion as at the end of March this year.

The recent appreciation of the dollar against the euro has reduced the dollar value of the reserves held in euros, and this has been partly responsible for the drop in reserves.