In a major development, the Reserve Bank of India (RBI) is likely to hire external financial consultants to manage some of its massive foreign exchange reserves, which are now estimated at record levels of around $ 600 billion, in order improve yields at a time when interest rates have reached an all-time high worldwide, reports Economic times.
With a foreign currency war chest reaching up to about one-fifth of India’s GDP, the RBI wants to better protect reserves, given the increasing complexity of managing flows from multiple channels.
Even in its last annual report, the RBI had stressed that its agenda was to continue to explore new asset classes, new jurisdictions and new markets for the deployment of foreign currency assets for portfolio diversification, and in the process of “seeking advice from outside experts, if necessary”.
Some global institutions, including some of the large consultancies and financial institutions, have also reportedly contacted RBI informally in this regard. However, no formal appointment has been made to date.
It should be noted that some of the major central banks in Southeast Asia have also reportedly appointed long-term asset managers to partially manage their foreign currency assets.