The RBI has steadily increased the share of US securities in forex assets. The RBI’s treasury purchase has grown more than fourfold, from $35.8 billion in 2008 to $161 billion in October 2019 on the back of safety and liquidity that the US papers offer.
Between November 2018 and January 2019, the RBI made US Treasury investments worth $7 billion, taking the total purchase to $144.9 billion by the end of January this year. Between February and June this year, the banking regulator purchased $18.4 billion worth US Treasury papers. By October this year, the investment had gone up to $161 billion.
With this, India has now become the 13th largest investor in US Treasuries and is ahead of South Korea, Germany, France, Thailand, Mexico, and Singapore as far as placement in the US sovereign debt is concerned.
Treasury paper is a short-term US government bond backed by the Treasury Department. These securities are considered as low-risk and secure investments.
A banking source, who did not wish to be named, said, “RBI always gives primacy to safety and liquidity, while taking a call on forex investments. Sovereign bonds of advanced economies fulfil both”.