New Delhi, 21 September 1968LETTERS
Special Secretary
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS
New Delhi
21st September, 1968
Sir,
I thank you for your letter dated 21st September 1968 recording the points which have been agreed between our tow Governments on the
Guarantee by the Government of United Kingdom and the maintenance of the Minimum Sterling Proportion by India which reads as follows
:
“Sir,
I have the honour to refer to discussions which have taken place between the Government of the United Kingdom of Great Britain and
Northern Ireland and the Government of India and to record below the points which have been agreed between our tow Governments on
the Guarantee by the Government of the United Kingdom and the maintenance of the Minimum Settling Proportion by India.
(1) Definitions
Unless otherwise agreed :
(a) “Total official external reserves”
(i) Gold;
(ii) Super-gold tranche in the International Monetary Fund, i.e. the extent to which the Fund’s holdings of Indian rupee fall short
of 75% of the India’s quota;
(iii) Cash, bank balances, money at call, time deposits, certificates of deposits, bank acceptances, bill of exchange and promissory
notes, denominated in freely transferable currencies other than the currency of India;
(iv) Treasury bills and other obligations issued or guaranteed by Governments or their agencies, states, provinces, organisations,
denominated in freely transferrable currencies other than the currency of India but excluding all obligations of the Government of
India or its territorial sub-divisons or agencies;
(v) Common or ordinary stock and shares, preferred stock and shares, redeemable and irredeemable interest-bearing securities issued
by companies or corporations which are quoted on a recognised security market, and units in unit trusts and shares in mutual funds
wherever such companies, corporations, trusts or funds may be domiciled other than India;
Which are held in the name or to the order of the Reserve Bank of India, the Government of India, its agencies and other official
institutions.
(b) “Official Sterling reserves” shall mean:
(i) Cash, bank balances, money at call, time deposits, certificates of deposit, bank acceptances, bills of exchange, promissory
notes;
(ii) Treasury Bills and other obligations issued or guaranteed by Governments or their agencies, states, provinces and municipalities
and international organisations, but excluding all obligations of the Government of India or its territories sub-divisions or agencies;
(iii) The following securities issued by the companies having their registered office and Head Office in the United Kingdom and
quoted on a Stock Exchange in the United Kingdom, and units in United Kingdom unit trusts;
(a) common or ordinary stock and shares and preferred stock and shares on which capital moneys and dividends are payable solely
in Sterling;
(b) units in unit trusts on which, under the terms of issue, capital moneys are payable solely in Sterling on liquidation or realisation;
(c) redeemable interest-bearing securities on which capital moneys are payable solely in Sterling.
(d) irredeemable interest bearing securities on which interest is payable solely in Sterling;
Which are denominated in Sterling and which are held in the name or to the order of the Reserve Bank of India, the Government of India,
its agencies and other official institutions with banks or other depositories in the United Kingdom and which are included in total
official external reserves.
(2) The Guarantee
The Government of the United Kingdom undertake to maintain the Sterling value in terms of the United States Dollar of the balances
eligible for guarantee, provided that the Minimum Sterling Proportion referred to below has been maintained by India upto and including
the date of implementation of the Guarantee. The circumstances in which the Guarantee would be implemented and the terms of implementation
shall be defined in consultation between the two Governments.
(3) Balances eligible for guarantee
The balances eligible for guarantee shall be that portion of official Sterling reserves by which those official Sterling reserves
exceed 10% of the total official external reserves as defined in paragraph (1)(a) above, except that no part of official Sterling
reserves falling under or bearing a right to conversion into a Security covered by (a) and (b) of paragraph (1)(b)(iii) above shall
be eligible for guarantee.
(4) The minimum Sterling Proportion
India shall throughout the period covered by the Agreement maintain official Sterling reserves in such proportion to total official
external reserves as may be fixed by consultation between the two Governments. The proportion shall be known as the Minimum Sterling
Proportion.
(5) Review
(a) The provisions of the Agreement may be reviewed at any time by agreement between both parties.
(b) The provisions of the Agreement shall be reviewed within six months period to the expiry of a period of three years from the
date of entry into force of the Agreement.
(6) Entry into force and Durations
The Agreement shall enter into force on the 25th of September 1968 and shall remain in force for a period of three years and may be
extended for a further two years by agreement between both parties.
2. If the Government of India agree that the foregoing correctly sets out the points agreed between the two Governments, I have the
honour to propose that this letter and your reply to that effect shall constitute an Agreement between the Government of the United
Kingdom of Great Britain and Northern Ireland and the Government of India.
I have the honour to be
Sir
Your obedient Servant,
Sd/-
J.A.TURPIN
Acting High Commissioner
for the United Kingdom for and on behalf of the Government of the United Kingdom”
3. I confirm that your letter correctly sets out the points agreed between the two Governments and that your letter and this reply
shall accordingly constitute an Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and
the Government of India.
On behalf of the President of India
Sd/-
I G PATEL
Special Secretary to the
Government of India
The High Commissioner
For the United Kingdom in India
New Delhi
