Date:14/12/2005 URL: http://www.thehindubusinessline.com/2005/12/14/stories/2005121402300600.htm

Back Arrangements in place for smooth redemption of IMDs

Our Bureau

Mumbai , Dec. 13

THE Reserve Bank of India, in co-ordination with the State Bank of India, has made necessary arrangements for the redemption of the India Millennium Deposits (IMDs). "Appropriate preparations and arrangements have been made to ensure that the redemption is done smoothly, in time and without causing any impact on the money, Government securities and foreign exchange markets," said an RBI release.

The IMDs for $5.5 billion raised in 2000 from non-resident Indians by SBI in US dollars, pound sterling and Euro are due for repayment on December 29. It is estimated that the redemption would entail foreign exchange outgo of about $7.3 billion (principal plus interest), which will be met entirely by RBI by way of direct sale out of its foreign exchange reserves to SBI at the prevailing market rate.

The rupee consideration for this sale, which is likely to be around Rs 33,000 crore, will be paid by SBI. Therefore, SBI has taken steps to mobilise rupee resources to purchase foreign exchange from RBI.

Exchange loss, on account of depreciation of rupee, would be shared between SBI and the Government of India. The RBI release said the system should be in a position to take care of the redemption requirements, given the present liquidity conditions in the market.

"We are in constant discussion with SBI to take care that IMD redemption is as eventless as the Resurgent India Bond redemption was. There is no general problem of liquidity given the amount we still have in the Market Stabilisation Scheme," said the RBI Deputy Governor, Dr Rakesh Mohan, at a press conference.