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India’s CB Should Start FX Fund: World Bank

The World Bank has recommended that the Reserve Bank of India should establish an investment fund to invest a portion of the country’s $185 billion foreign exchange reserves in a wider range of global markets.

Praful Patel, South Asia vice-president of the World Bank says that investment into newer global instruments is expected to reap higher returns. “It would also raise the standards of investing by means of financial engineering,” he says.

At present, India’s central bank invests its foreign reserves in US and European treasury securities.

The development follows similar moves by China in establishing a central investment body to invest its reserves more actively in global markets (see Squawkbox, February 19, 2007).

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