New Delhi. India’s foreign exchange reserves have crossed 700 billion dollars for the first time. According to Reserve Bank of India (RBI) data released on Friday, foreign exchange reserves increased by $ 12.5 billion to an all-time high of $ 704.89 billion during the week ended September 27. India’s foreign exchange reserves have increased by $87.6 billion so far in 2024. This figure has crossed the total growth of last year (2023) of 62 billion dollars in the month of September itself.
After China, Japan and Switzerland, India has become the fourth economy in the world to cross the reserves of $ 700 billion. The country has been paying to increase its foreign exchange reserves since 2013. This trend started when foreign investors started withdrawing money from the Indian market due to the weak macroeconomic scenario. Earlier, India’s forex reserves had increased by $ 2.8 billion to $ 692.3 billion in the week ending September 20. According to the weekly data released by the Reserve Bank of India, foreign currency assets increased by $ 10.4 billion to $ 616 billion. Expressed in dollar terms, FCA takes into account the impact of appreciation or weakness in non-US currencies such as the euro, pound and yen held in foreign exchange reserves.
Gold reserves and SDR also increased
At the same time, during the week under review, an increase of two billion dollars was recorded in the gold reserves and it became 65.7 billion dollars. During the said week, SDR (Special Drawing Rights) saw a slight increase of eight million dollars and it stood at $18.547 billion. During this period, the reserve position in IMF decreased by 71 million dollars to 4.3 billion dollars. According to Bank of America, India’s foreign exchange reserves will increase to $745 billion by March 2026, giving the Reserve Bank of India more potential power to influence the rupee.
Bank of America made this comment on RBI
Bloomberg quoted Bank of America analysts Rahul Bajoria and Abhay Gupta as saying that the monetary authority is reticent about holding large foreign exchange reserves because of its desire to create a buffer against sudden external risks. He said the adequacy of India’s foreign exchange reserves appears to be stronger than that of other major emerging markets, but not necessarily very high. This amount provides stability to the rupee against external shocks. The RBI uses its reserves to limit excessive fluctuations in the Indian currency, which is hovering near record lows.
RBI keeps a close eye on foreign exchange markets
RBI from time to time intervenes in the market through liquidity management including sale of dollars to prevent sharp fall in the rupee. The RBI closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions by controlling excessive volatility in the exchange rates, irrespective of any pre-determined target level or band.
Source : palpalindia
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