Total external financial assets of Indian residents rose 7.15 percent to $401.7 billion in the second quarter against $374.9 billion in the previous quarter, revealed the figures by India's central bank.

According to the Reserve Bank of India's data on the country's International Investment Position (IIP), pointing to the difference between assets held by residents and non-resident Indians, direct investments into the asset abroad increased by $4.1 billion to $89.2 billion.

While portfolio investment by Indians — particularly in equity securities — stayed flat at $900 million during the July-September quarter, other investments in the overseas markets — including trade credits, loans and currency and deposits — rose 42 per cent to $18.6 billion against the earlier quarter.

As loans increased by $2.7 billion to $6.1 billion in the second quarter, currency and deposits rose to $10.3 billion against $2.4 billion in the first quarter and the reserve assets of the country went up by $17.2 billion to $292.9 billion.

Similarly, India's total external financial liabilities grew 11 percent to $612.8 billion in the second quarter against $552.8 billion in the previous quarter and direct investment into the country increased by $13.5 billion to $191.7 billion.

Portfolio investment rose by $28.8 billion to $164.3 billion over the previous quarter as the Indian economy expanded by 8.9 percent during the second quarter, said the IIP report.

Liabilities — such as trade credits, loans and currency and deposits — cumulatively rose by $17.6 billion to $256.8 billion because of fund availability at quite lower interest rates than the domestic markets, it added.

A separate report by Indian Finance Ministry, meanwhile, revealed that the country's foreign exchange reserve dropped below its external debt during the second quarter of 2010-11 fiscal.

India's external debt stood at $295.85 billion during the second quarter, an excess of nearly $3 billion over the country's forex reserve, said the report.

India's external debt soared to $295.85 billion, the steepest rise in any quarter since March 2008, on the back of higher commercial borrowings and short term debt, which together accounted for over 70 percent of the total increase, the report said.

In the first half of 2010-11 fiscal, the external commercial borrowings rose by $10 billion to $82 billion.