This article presents an analysis of trends in international
liabilities and assets of Banks in India at quarterly intervals
from 2009 onwards with special focus on the recent period
pattern observed for the quarters ending June, September
and December 20121. For this purpose, International
Banking Statistics (IBS)2 collected as per the reporting
system of the Bank for International Settlements (BIS)3 is
used. The article also gives a broad comparison of external
debt with the international liabilities of banks in India.
From a global perspective, the article provides a broad
picture of foreign claims on the BRICS countries. The
related data were released on the RBI website on June 21
2013.
Highlights
-
International liabilities (in ` terms) of the banks
located in India grew substantially (y-o-y) by 25.5 per cent in December 2012, whereas their
international assets declined by 1.4 per cent. This
is in contrast with the position observed during the
financial year 2011-12. Business in India of such
banks also recorded some deceleration in the
quarter ended December 2012.
-
Globally, international banking business contracted
throughout 2012.
-
The growth in international liabilities is contributed
mainly by NRE deposits and Foreign Currency
borrowings and decline in international assets is
due to substantial decline in NOSTRO balances.
-
During 2012, increase in international liabilities
was reflected in increase in exposure towards the
USA, UK and UAE, whereas the decline in
international assets was reflected towards the USA,
Singapore, Hong Kong and France.
-
As at end-December 2012, the US Dollar comprised
the major component of international liabilities
with a share of 80.5 per cent and for international
assets the INR was the major component with a
share of 57.0 per cent.
-
The international claims of Indian banks, on
immediate risk basis, on all other countries grew
at a lower rate of 15.0 per cent as at end-December
2012 than 16.2 percent for the previous year. Out
of total international claims, the exposure towards
banking sector grew at 11.7 per cent and that
towards non-bank sector grew at 16.8 per cent.
-
The consolidated foreign claims on ultimate risk
basis grew at 11.2 per cent at end-December 2012
compared to 15.4 per cent observed a year ago, the
growth is reflected towards Hong Kong, UAE and
Canada.
-
The growth in consolidated foreign claims towards
India was below that of BRICS nations put together
till Q2:2012. However, the situation reversed in
Q4:2012 when claims in India grew by 10.0 per cent
which was higher than 6.8 per cent for BRICS
nations.
International assets and liabilities of banks in all BIS
reporting countries declined
1. Both international assets and liabilities of banks
in all BIS reporting countries as seen from the Locational
Banking Statistics (LBS) of the BIS (Table 1) continued
to contract as at end-December 2012. The international
exposures of the global banking system has been
decelerating since March 2012 quarter after showing a
low growth in the second half of 2011 reflecting higher
risk perception.
Table 1: International Liabilities and Assets for All Reporting Countries based on Nationality4 |
(Amount outstanding in US$ Trillion) |
Year-Qrt |
Liabilities on
all sectors |
Claims/ assets
to all sectors |
2009-Q1 |
32.26 |
(-17.4) |
33.49 |
(-17.0) |
2009-Q2 |
32.68 |
(-13.4) |
34.16 |
(-12.7) |
2009-Q3 |
32.98 |
(-9.0) |
34.49 |
(-8.1) |
2009-Q4 |
32.35 |
(-4.8) |
33.81 |
(-3.9) |
2010-Q1 |
31.85 |
(-1.3) |
33.39 |
(-0.3) |
2010-Q2 |
31.03 |
(-5.0) |
32.35 |
(-5.3) |
2010-Q3 |
33.42 |
(1.3) |
34.84 |
(1.0) |
2010-Q4 |
32.82 |
(1.4) |
33.98 |
(0.5) |
2011-Q1 |
34.29 |
(7.7) |
35.36 |
(5.9) |
2011-Q2 |
34.54 |
(11.3) |
35.68 |
(10.3) |
2011-Q3 |
34.81 |
(4.2) |
35.79 |
(2.7) |
2011-Q4 |
33.42 |
(1.8) |
34.20 |
(0.7) |
2012-Q1 |
34.07 |
(-0.7) |
34.81 |
(-1.5) |
2012-Q2 |
32.97 |
(-4.5) |
33.44 |
(-6.3) |
2012-Q3 |
33.41 |
(-4.0) |
33.93 |
(-5.2) |
2012-Q4 |
32.96 |
(-1.4) |
33.54 |
(-1.9) |
Note: 1. Data as reported under Locational Banking Statistics to the BIS by all reporting countries.
2. The figures in parenthesis denote annual growth rates. |
International liabilities of Banks in India experienced
an accelerated growth.
2. In order to provide greater flexibility to banks in
India for mobilising non-resident deposits and in view
of the prevailing market conditions, it was decided to
deregulate interest rates on NRE and NRO deposits
since December 20115. This was reflected in an
accelerated growth recorded in the international
liabilities (based on LBS) since March 2012. The
international liabilities grew by 25.5 per cent as at end-December 2012 as compared with a moderate growth
of 8.6 per cent for March 2012.
3. International/cross border assets based on the LBS
of the Indian banking system decelerated since March
2012. The international assets declined by 1.4 per cent
at end of December 2012 (Chart 1) as compared with a
growth rate of 21.6 per cent in March 2012. The decline
observed in the international exposures during the
period may reflect lower demand for such credit and
also a cautious attitude of the banks towards
international exposures.
NRE deposits surged while, FCNR(B) deposits
stagnated
4. Outstanding non-resident external rupee deposits,
at end-December 2012 grew by more than 50 per cent
from the position a year ago (Chart 2). The share of the
NRE deposits in the international liabilities increased
from 26.5 per cent to 33.6 per cent during the period.
5. In spite of the increase in the interest rates on
FCNR(B) deposits effective November 23, 2011, the
deposits failed to pick up at end-December 2012 over
the previous year, however, the deposits were higher
as compared to the previous quarter.
6. The investment by non-residents in the ADRs/
GDRs and equities of banks also picked up at end-
December 2012, boosting up the overall growth of the
international liabilities. Consequently, the share of the ‘Other international liabilities’ increased to 22.0 per
cent from 18.7 per cent a year ago.
Increase in long-term debt was led mainly by NRI
deposits and commercial borrowings
7. The surge in the NRE deposits observed since
Q1:2012 led to increase in the long-tem external debt
(Table 2) of India.
Table 2 : Composition of India's External debt |
(US $ Billion) |
Components |
Amount outstanding (As at end) |
Mar-2011 |
Jun-2011 |
Sep-2011 |
Dec-2011 |
Mar-2012 |
Jun-2012 |
Sep-12 |
Dec-12 |
Long-term debt |
241.14 |
248.42 |
252.40 |
256.90 |
267.31 |
268.61 |
280.88 |
284.41 |
(78.8) |
(78.4) |
(77.9) |
(76.7) |
(77.4) |
(77.0) |
(76.8) |
(75.6) |
Out of which |
External Commercial Borrowings |
88.75 |
93.35 |
96.78 |
100.09 |
104.84 |
104.29 |
108.82 |
112.97 |
(29.0) |
(29.5) |
(29.9) |
(29.9) |
(30.3) |
(29.9) |
(29.8) |
(30.0) |
NRI Deposits |
51.68 |
52.90 |
52.50 |
52.50 |
58.61 |
60.87 |
67.02 |
67.59 |
(16.9) |
(16.7) |
(16.2) |
(15.7) |
(17.0) |
(17.4) |
(18.3) |
(18.0) |
Short-term debt |
64.99 |
68.47 |
71.53 |
78.05 |
78.18 |
80.45 |
84.66 |
91.88 |
(21.2) |
(21.6) |
(22.1) |
(23.3) |
(22.6) |
(23.0) |
(23.2) |
(24.4) |
Total External Debt |
306.13 |
316.90 |
323.93 |
334.95 |
345.48 |
349.06 |
365.55 |
376.29 |
(100.0) |
(100.0) |
(100.0) |
(100.0) |
(100.0) |
(100.0) |
(100.0) |
(100.0) |
Source: Ministry of Finance, Dept. of Economics Affairs, External Debt Management Unit (www.finmin.nic.in)
Notes: Figures in parenthesis Represent Percentage to Total External Debt. |
8. The other component for increase in the external
debt is external commercial borrowings which includes
the foreign currency (FC) borrowings by the banking
sector. The total FC borrowings by the banking sector
have seen an increase of 25.9 per cent at end-December
2012 after a decline of 1.8 per cent in the previous
quarter.
NOSTRO balances declined
9. The substantial decline of 23.1 per cent in the
NOSTRO balances at end-December 2012, over last
December, pushed down the international assets in
spite of the moderate increase of around 8.0 per cent
in loans to non-residents and outstanding exports
bills (Chart 3).
10. The largest component of the international assets,
viz., ‘foreign currency loans to residents’, registered a
low growth of 2.0 per cent during the period.
11. Consequent on huge increase in the NOSTRO
balances at end of Q1:2012 from the previous quarter,
its share in the international assets had increased to a
high of 24.7 per cent, but it declined to 17.3 per cent
at end of Q4:2012. Correspondingly, the share of the
FC loans to residents, the largest component, increased to 51.2 per cent after a dip to 47.2 per cent at end of
Q1:2012.
Currency composition for international assets
remained unchanged while share of INR marginally
increased in international liabilities
12. The currency composition of the international
assets remained more or less unchanged since June
2012 (Chart 5). US Dollar being the major component
had a share of 80.5 per cent at end-December 2012.
13. On account of the steady and substantial increase
in the NRE deposits since end-March 2012, the share
of the INR in the international liabilities went up to
57.0 per cent at end-December 2012 from 52.5 per cent
a year ago (Chart 4).
International liabilities towards non-bank sector
recorded high growth
14. Owing to the increase in the non-resident deposits
since March 2012, the exposure towards non-bank
sector rose by 26.6 per cent at end-December 2012.
However, the share of the non-bank sector in the
international liabilities remained unchanged around
74.0 per cent since December 2011.
15. At end-December 2012, the international assets
towards the non-bank sector grew by 5.2 per cent as
against a decline of 1.4 per cent in total international
assets. Correspondingly, the share of non-bank sector
in the international assets has gone up to 69.5 per cent
from 65.1 per cent a year ago.
Share of International liabilities towards
UAE went up
16. The overall increase in the international liabilities
is reflected in the country-wise exposures of the
international liabilities for the period of 2012. At end-
December 2012, the exposure towards almost all countries except Germany has seen a rise from the
December 2011 level. The share of the exposure
towards UAE rose to 11.5 per cent from 7.3 per cent at
end-December 2011 (Chart 6), on account of higher
mobilisation on NRE deposits, while that towards USA
declined to 28.1 per cent from 31.6 per cent during
the period.
Decline in the overall NOSTRO balances distributed
across all countries
17. At end-December 2012, the overall decline in the
international assets is reflected in the exposures
towards USA, Singapore, Hong Kong, Germany and
France (Chart 7). The decline in the exposures towards these countries is on account of the decline in the
NOSTRO balances with the banking sector of these
countries.
Box: Foreign Claims on BRICS Nations – Position of India in December 2012
Continuing the trends observed during 2012, the
consolidated foreign claims towards all countries, based
on data reported to the BIS, grew at meagre 1.0 per cent
in December 2012 quarter. However, the claims on
BRICS (Brazil, Russia, India, China and South Africa)
nations had a moderate growth during 2012 except for
June 2012 quarter when the claims declined by 0.4 per
cent. Since Q3:2010, the growth in claims towards India
was below the growth for BRICS together and it
continued till Q2:2012. However, the situation reversed
in Q4:2012 when claims on India grew by 10.0 per cent,
which was higher than 6.8 per cent for BRICS nations
(Chart A).
The share of the foreign claims towards India at 1.1 per
cent for December 2012 quarter put India at third
position among the BRICS countries after China and
Brazil.
The international claims for all countries towards
banking and non-bank private sector had an equal share
of about 44.0 per cent for March 2009 quarter. However,
the share of claims on banking sector reduced to 38.5
per cent and that towards non-bank private sector increased to 46.3 per cent at end-December 2012
(Chart B).
In contrast, the share of international claims on BRICS
nations towards banking sector has gone up to 65.0 per
cent at end-December 2012 from 56.0 per cent for March
2009 quarter (Chart C).
The share of international claims on India’s banking
sector has moderately increased to 37.2 per cent at end-
December 2012 from 34.4 per cent. This share has been
lower as compared with the exposure towards banking
sector of BRICS nations for the period 2009-2012.
18. During the period, the exposure towards UK and
UAE has increased. While the NOSTRO balances held
with banking sector of UK has declined during the period, the increase in the exposures towards UAE is
accounted to the outstanding exports bills.
Share of UAE in international claims on immediate
risk basis increased
19. The international claims of Indian banks, on
immediate risk basis, based on Consolidated Banking Statistics (CBS), on all other countries grew at a slightly
lower rate of 15.0 per cent at end-December 2012 than
16.2 per cent in the previous year.
20. At end-December 2012, as compared with the
growth in total international claims, growth rate of
international claims on banking sector was lower at
11.7 per cent while that on non-banking private sector
was higher at 16.8 per cent.
21. At end-December 2012, the share of the
international claims towards USA and UK declined
(Chart 8). The claims on UAE have seen a substantial
rise during 2012 and its share rose to 8.3 per cent in
December 2012 from around 6.5 per cent observed for
all the quarters in 2011.
22. The foreign claims of BIS reporting countries on
India on immediate risk basis grew at a higher rate of
10.0 per cent at end-December 2012 than 4.2 per cent
observed in December 2011.
Higher consolidated foreign claims on ultimate risk
basis for select countries
23. The consolidated foreign claims on ultimate risk
basis grew at 11.2 per cent at end-December 2012
compared to 15.4 per cent observed a year ago. The
foreign claims towards Hong Kong, UAE and Canada
increased over the previous year with corresponding
increase in the shares towards these countries. The
foreign claims towards USA registered marginal
increase, but its share declined.
24. The contingent claims on ultimate risk basis
arising from derivatives, at end-December 2012, grew
at a higher rate of 18.7 per cent than 8.0 per cent
observed an year ago.
25. The contingent claims on ultimate risk basis,
arising out of guarantees and credit commitments, also
grew at a higher rate than the previous year.
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