Mumbai: Reserve Bank of India (RBI) Deputy Governor Rakesh Mohan on January 30 said US-Iraq war threat "is a not a major concern for India's foreign exchange reserves and any effect on inflation will depend on oil prices but the impact is expected to be limited".

"Obviously, it (war) will have some effect presumably on the markets worldwide and forex but given the level of reserves (in excess of USD 72 billion) it is not a major issue," Mohan told reporters on the sidelines of an annual conference on Money and Finance in Indian Economy.

The subject of foreign exchange reserves was a very active issue and in recent weeks there has been a debate on cost of holding such reserves and interest rate differential causing arbitrage, he said.

"RBI is studying this issue and expects to come out with its analysis and results by end of this week," he added.

Referring to impact on inflation in a war situation, he said it would depend on oil prices "but nobody knows where they will go. The prices in recent past have shot up from $ 20 per barrel to $ 30 but it had no impact on inflation".

The Indian economy has the resilience as it has withstood both increased oil prices and drought because of good level of forex reserves and ample food stock, the Deputy Governor added.

On repayment of multilateral loans worth $ 2.8 billion, he said government would privately place the bonds with RBI.

Referring to state governments raising bonds for the debt swap arrangement, Mohan said, "finance ministry has to decide on the amount and we are working on it. Whether it will be in FY-03, is for the government to decide".

PTI