Last Sunday, Business Line carried an interesting article on the recent foreign currency losses suffered by RBI. This came to light when the annual report of RBI was made available. What staggers me is the amount of loss suffered by RBI in its Currency and Gold Revaluation Account - Rs65,000/- crores. Hold your breath!! I am not joking, this is the figure reported by RBI.
Ofcourse, this is not a cash loss, per se, but a notional loss in its books. The Revaluation account which had a balance of Rs86,000/- crores odd amount as of June 30, 2006 has come down to Rs21,724/- crores. You can read the entire Business Line article here.
As a layman, I have the following questions:
1. Does RBI follow any prudent hedging mechanism to cover/reduce the foreign exchange losses? If not, why we are not following a hedging strategy to safeguard our assets.
2. Who is to be held accountable for the staggering loss of close to Rs65000/- crores? Would it be RBI or the Government?
Anybody who has an idea/explanation/understanding of this subject can provide me with further inputs.