- India's foreign exchange reserves jumped by $9.905 billion to $716.907 billion in the week ended August 14, according to data released by the Reserve Bank of India (RBI) on Friday.
- The latest increase takes the country’s forex reserves to a six-month high and brings them closer to the record level of around $728.5 billion reached in February.
- The reserves have risen for seven consecutive weeks, adding around $50 billion during the period.
- RBI received nearly $57 billion in inflows by August 13, prompting it to advance closure of the deposit hedging facility to August 31.
- Reserves now at $716.9 billion, within striking distance of the February peak.
- The foreign exchange reserves hit a record $728.49 billion in the week ended February 27 this year, before declining as the RBI intermittently sold dollars to curb excessive volatility in the rupee.
- In June, RBI introduced measures to attract dollar inflows, including discounted hedging facilities for overseas borrowings by state-run firms and banks.
- Despite the strong inflows, the RBI has continued to intervene in the foreign exchange market to manage volatility in the rupee.
India's foreign exchange reserves have reached $716.9 billion, a six-month high, following a $9.9 billion increase in the week ending August 14. This surge is attributed to nearly $57 billion in foreign currency inflows and a $2.7 billion rise in gold holdings.125
The Reserve Bank of India (RBI) reported that the reserves have increased for seven consecutive weeks, accumulating around $50 billion during this period. The largest component, foreign currency assets, rose by $7.2 billion to $581.85 billion.3
The RBI's measures to attract dollar inflows, including discounted hedging facilities for state-run firms, have significantly contributed to this growth. By August 13, the RBI had received nearly $57 billion in inflows, primarily from over $50 billion in foreign exchange deposits.7
Despite these inflows, the RBI has actively intervened in the foreign exchange market to manage rupee volatility. The Indian currency closed at approximately Rs 95.69 per US dollar, reflecting a weekly decline of about 0.3% due to rising oil prices and geopolitical tensions.8
The RBI's strategy appears to be working, as the reserves are now within reach of the record high of $728.5 billion achieved in February. Gaura Sen Gupta, chief economist at IDFC First Bank, noted, "The RBI bought around $5.6 billion; the rest is revaluation gain led by gold."
Overall, the steady buildup of reserves indicates a robust response to external economic pressures and a proactive approach by the RBI to strengthen India's financial position.
“The RBI's June measures, including discounted hedging for overseas borrowings, attracted over $50 billion in FX deposits by August 13, prompting the central bank to advance the closure of its deposit hedging facility to August 31. Despite the inflows, the RBI continues to intervene to manage rupee volatility, with the currency closing at Rs 95.69 per dollar.”
