The decrease was due to a drop in holdings of foreign currency, which fell by $40 million to $30.573 billion in the week, India's central bank said.

The bank doesn't provide explanations for week-to-week changes in the reserves. Factors that affect these reserves include interest payments on multilateral loans, revaluation of foreign currency assets and intervention by the central bank in the foreign exchange market by selling or buying dollars. Total foreign exchange reserves were higher by $ 4.954 billion from the same week in 1998, while foreign currency holdings were up by $5.363 billion, the RBI said.

The government's borrowings, according to the RBI, under the Ways and Means Advances account with the Reserve Bank of India rose to Rs 45.06 billion for the week ended May 28. Thisindicates that the government's borrowing under this route was within its limit of Rs 82.50 billion. The government's withdrawals under this route was at INR35.25 billion for the previous week ended May 21, and increased by INR9.81 billion during the week.

The Ways and Means Advances is a withdrawal facility provided by the Reserve Bank to the government to meet temporary mismatches in their cash flows.

Under the agreement between the central bank and the government, if Ways and Means Advances rise beyond INR82.50 billion (75% of the total limit of INR110 billion), the government must make a fresh issue of securities to repay the account. Money market players watch the figure closely, as it indicates whether or not a new issue of government paper is on the way.