India’s foreign exchange reserves decline

Mumbai: India’s foreign exchange reserves declined by about USD 2.4 billion to USD 560.003 billion in the week ending on March 10, according to the Reserve Bank of India’s latest data.

During the prior week that ended on March 3, India’s foreign exchange reserves rose for the first time in five weeks to USD 562.40 billion, an increase of USD 1.45 billion, data showed.

According to RBI’s latest data, India’s foreign currency assets, the biggest component of the forex reserves, declined USD 2.22 billion to USD 494.863 billion.

Gold reserves declined by USD 110 million to USD 41.923 billion.

At the start of the last year 2022, the overall forex reserves were at about USD 633 billion. Much of the decline can be attributed to RBI’s recent intervention and a rise in the cost of imported goods.

In October 2021, the country’s foreign exchange reserves reportedly touched an all-time high of about USD 645 billion.

The forex reserves had been intermittently falling for months now largely because of the RBI’s intervention in the market to defend the depreciating rupee against a surging US dollar.

Typically, the RBI, from time to time, intervenes in the market through liquidity management, including through the selling of dollars, with a view to preventing a steep depreciation in the rupee.

The RBI closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions by containing excessive volatility in the exchange rate, without reference to any pre-determined target level or band.