Page 389 - Contributed Paper Session (CPS) - Volume 4

CPS2444 Avijit Joarder et al.
2017 for claims and from 11.0% in 2001 to 8.7% for liabilities. The cross-border
claims/liabilities in all currencies and local claims/liabilities in foreign
currencies into sector non-banks and others (mainly banks) are asymmetrical.
As of end-2017, the share of international claims on non-bank sectors was
70% whereas the same for international liabilities was 81%. The total claims
and liabilities are the sum of world-wide consolidated balance sheet positions
of Indian domestic banks, including operations of their foreign affiliates, plus
unconsolidated total positions of foreign-owned banks for their operations in
India. The domestic positions, i.e. positions vis-à-vis residents of Indian in
Indian rupees, are thus assumed as the differences between total positions
and international positions.
The country breakdown of international positions suggested that
counterparties in the United States dominate share for both claims and

4 We did not consider other jurisdictions such as Hong Kong SAR and Singapore as they are
different in terms of financial activities (Maria [20091, Raymond and James [20041).
liabilities in recent years. In 2017, share of banks’ foreign currency claims at
home on residents stood at 28.3%, whereas share of cross-border claims on
United States (US) stood at 36.7% of total international claims. Cross-border
claims on United Kingdom (UK) declined over the years from 16.8% in 2001 to
6.1% in 2017. On liability side, the share of cross-border liabilities towards US
was the highest (22.4% of total international liabilities, as of 2017) among
other counterparties. Share of liabilities towards UK declined over years from
13.2% in 2001 to 10.5% in 2017. Share of liabilities towards United Arab
Emirates slowed down before GFC and recovered slowly after GFC and stood
at 19.2% in 2017.

3.3: Cross-border capital flow – counterparties in India versus banks in
foreign countries
India has been the beneficiary of the capital flows as a promising
investment destination and the GoI as well as the RBI are committed to
continue to press the advantage by ushering in necessary reform measures
(Mundra [2010]). In this context, we examine money inflow to India and money
outflow from India through the banks in foreign countries.
Claims of Indian residents on foreign banks (i.e. outflow from India)
increased from 6 billion US dollar (USD) in end-March 1990 to nearly 73 billion
USD in end-2017. In early 1990s, the share of outflow from non-bank sector
was above 60% of total but continued to fall to 13% in early 2006. The GFC
triggered the rise with most funds directed mostly towards banks in the US,
Offshore centres and UK, reaching the share close to 50% by mid-2011. The
outflow from non-banks to banks located in UK, Euro area and offshore
centres began to decline and reached at 12% by end-2017. On the other hand,

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