Forex reserves cross $300 bn at February-end

India's foreign exchange reserves touched $301.23 billion by the end of February 2008.

Over $102 billion have been added to the reserves since the beginning of the financial year (April 2007) due to huge capital flows, and remittances as well as weakening of dollar.

The reserves stood at $294.61 billion at the end of February 22, 2008. The forex kitty swelled by $6.62 billion, amongst the largest accretion to reserves in a span of a week. At the end of December 2007, reserves were $275.55 billion. This means addition of $25.9 billion in first two months of calendar 2008.

These large flows have come at the cost to the system.

The Reserve Bank of India has had to frequently issue government securities under Market Stabilisation Scheme (MSS) to mop up excess liquidity in the system on account of huge flows.

The interest cost for MSS securities is borne by the Centre. At the beginning of FY08, the allocation for net interest payment under MSS were Rs 3,700 crore.

Later, the government revised it to Rs 8,351 crore. For 2008-09, the allocation is pegged at Rs 13,958 crore.