India’s foreign exchange reserves surged by $12.422 billion to a new all-time high of $729.328 billion in the week ended August 21, Reserve Bank of India (RBI) data showed on Friday.The country’s forex reserves have now risen for eight consecutive weeks, increasing by about $63 billion during this period and surpassing the previous record reached in February.
Foreign currency assets , gold drive weekly rise
Foreign currency assets, the biggest component of the reserves, rose by $9.482 billion to $591.333 billion during the reporting week, according to the RBI.The value of India’s gold reserves increased by $2.801 billion to $114.218 billion.Special Drawing Rights (SDRs) rose by $112 million to $18.852 billion, while India’s reserve position with the International Monetary Fund increased by $26 million to $4.925 billion, as per the RBI data.Changes in foreign currency assets, expressed in dollar terms, include the impact of appreciation or depreciation of non-US currencies such as the euro, pound and yen held in the country’s reserves.
Measures to boost dollar inflows
The record rise comes after India introduced a series of measures in June to attract overseas dollar inflows and strengthen the country’s balance of payments.The measures included discounted hedging facilities for overseas borrowings by state-run firms and banks, along with a free-of-cost hedging facility for banks to raise overseas foreign currency deposits.The RBI received nearly $73 billion under these schemes between June 5 and August 21, including about $65 billion from non-resident Indian deposits.The scale of the inflows prompted the central bank to bring forward the closure of its deposit hedging facility by a month to the end of August.“The rise in FX reserves is a combination of RBI buying dollars during that week and the rest is revaluation gain. The dollar purchase is led by FCNR-B swap window with banks pushing for deposits before the window closes,” Gaura Sen Gupta, chief economist at IDFC First Bank, told Reuters.
RBI interventions offset some inflows
The RBI’s frequent interventions in the foreign exchange market to support the rupee have likely offset the impact of some of the overseas dollar inflows, bankers told Reuters.India’s previous record forex reserve level of $728.494 billion was reached in the week ended February 27.Geopolitical tensions that followed led to several weeks of decline in reserves as the rupee came under pressure and the RBI intervened in the forex market through dollar sales.