RBI to buy upto $ 10 billion in IMF notes

The Reserve Bank of India (RBI) has signed an agreement with the International Monetary Fund (IMF) under which it would purchase upto $ 10 billion in IMF notes that would boost the multi-lateral institution's lending capacity to help its members weather the global financial crisis.

The promissory notes will be issued in a Special Drawing Rights (SDR)-denominated amount upto the equivalent of $ 10 billion.

An IMF press release said the note purchase agreement followed the endorsement by its Executive Board on July 1 last year of the framework for issuing notes to the official sector.

The Indian authorities had already expressed their intention in September, 2009 to invest in IMF notes, it said.

The release said the agreement offered India a safe investment instrument at the same time as boosting the Fund's capacityto help its members to weather the global financial crisis and to facilitate an early recovery from the worldwide economic crisis.

"The Fund can now add these resources to those already available through agreements signed with other members, which contribute towards an increase in Fund resources that was requested in April 2009 by G-20 leaders and the International Monetary and Financial Committee," it added.

In Mumbai, the RBI said the agreement was a part of the international efforts to support the IMF's lending capacity following the decision of the G-20 in its London Summit to treble the resources available to the Fund to $ 750 billion.

"This agreement is a temporary bilateral arrangement for an initial period of one year, which may be extended for a period of upto two years," an RBI press release said

It said permanent increases in the resources of the IMF were expected to take place through an increase in quotas and standing borrowing arrangements which were currently under negotiation.

"With the signing of this agreement by the RBI with the IMF, India as a member of the G-20 has fulfilled its commitments in this regard," the release added.

NNN