- India's forex reserves climbed to a record $729.33 billion, adding roughly $63 billion in just eight weeks as a sustained wave of dollar inflows strengthens the country’s external buffer.
- For the week ended August 21, reserves rose $12.4 billion, extending the run of weekly gains to eight.
- The latest increase also pushed the reserve pile above the previous peak reached in February.
- The RBI received nearly $73 billion through these schemes between June 5 and August 21, with about $65 billion coming from deposits by non-resident Indians.
- The surge in deposits was strong enough for the central bank to advance the closure of its deposit hedging facility by a month to the end of August.
- In June, the central bank rolled out a series of incentives aimed at bringing more dollars into the banking system and supporting India’s balance of payments.
- These included discounted hedging facilities for overseas borrowings by state-run companies and banks, along with a free-of-cost hedging facility for banks seeking to raise foreign exchange deposits overseas.
- The latest data suggest the schemes have been highly effective in attracting foreign currency, with NRI deposits accounting for the bulk of the inflows recorded under them.
- At $729.33 billion, the country’s forex reserves provide a sizeable buffer against currency volatility and global financial shocks.
India's foreign exchange reserves reached a historic $729.33 billion as of August 21, reflecting a remarkable $63 billion increase over eight weeks. This surge is attributed to a wave of dollar inflows, primarily from non-resident Indian (NRI) deposits, which accounted for about $65 billion of the total inflow.4
The Reserve Bank of India (RBI) reported a $12.4 billion rise in reserves for the week ending August 21, extending a streak of eight consecutive weeks of growth. The central bank's initiatives, including discounted hedging facilities for state-run companies and banks, have effectively attracted foreign currency, with nearly $73 billion received through these schemes since June 5.27
The latest increase was driven by foreign currency assets, which rose $9.5 billion to $591.33 billion, while gold holdings also contributed significantly, increasing by $2.8 billion to $114.22 billion. Additionally, India's Special Drawing Rights with the IMF rose to $18.85 billion, and its reserve tranche position increased to $4.93 billion.
The RBI's strategy of accumulating foreign currency during strong inflow periods enhances its ability to manage currency fluctuations and external shocks. However, some analysts caution that the recent surge may be temporary, as banks and depositors may have accelerated fund transfers to leverage the facility before its early closure at the end of August.
“The RBI received nearly $73 billion through its swap schemes between June 5 and August 21, with about $65 billion from NRI deposits. The surge was strong enough to close the deposit hedging facility a month early, though some inflows may prove temporary as banks brought funds forward.”
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