Source Reuters
MUMBAI — India’s foreign exchange reserves surged by $11.47 billion to reach a fresh all-time high of $740.80 billion for the week ending August 28, according to data released by the Reserve Bank of India (RBI). This marks the second consecutive week of double-digit billion-dollar growth, extending a robust nine-week rally that has aggressively replenished the country’s external buffers.
The record-breaking accumulation is largely credited to the RBI’s strategic market interventions launched in June. By introducing concessional dollar-rupee swap and hedging facilities, the central bank made it substantially cheaper for domestic banks to raise overseas funds and offer highly attractive rates on Foreign Currency Non-Resident (Bank), or FCNR(B), deposits.
This move triggered a massive rush of inbound dollar deposits. Between early June and August 31, Indian banks mobilized over $136 billion through these special routes. Approximately $127 billion of this total poured in specifically from non-resident Indian (NRI) deposits—a response that so vastly exceeded initial expectations that the RBI closed the FCNR(B) window a month ahead of its original September deadline.
A breakdown of the reserves for the week ending August 28 reveals growth across major components:
Foreign Currency Assets (FCA): Rose by $9.34 billion to reach $600.67 billion.
Gold Reserves: Climbed by $2.19 billion, taking the total gold holdings to $116.41 billion.
Special Drawing Rights (SDRs): Dipped slightly by $43 million to $18.81 billion.
IMF Reserve Position: Decreased by $11 million to $4.91 billion.
The rapid rebuilding of the forex kitty provides the RBI with significant ammunition to defend the local currency. Earlier in the year, the central bank had been forced to heavily draw down reserves to manage currency volatility triggered by the conflict in the Middle East. With reserves now at unprecedented levels, the RBI is well-positioned to maintain orderly market conditions and absorb future global economic shocks.
