Forex Reserve Crossed $700 billion for the first time
New Delhi| India’s foreign exchange reserves have crossed $700 billion for the first time. Foreign exchange reserves rose by $12.5 billion to an all-time high of $704.89 billion during the week ended September 27, according to data released by the Reserve Bank of India (RBI). India’s foreign exchange reserves have so far increased by $87.6 billion in 2024. This figure has already crossed the figure of $62 billion in the month of September, the total increase of last year (2023).
India has become the fourth economy in the world to surpass $700 billion in reserves, after China, Japan and Switzerland. What the country has been giving since 2013 on increasing its foreign exchange reserves. This trend started when foreign investors started withdrawing money from the Indian market due to weak macroeconomic scenario. Earlier, India’s forex reserves had increased by $2.8 billion to $692.3 billion in the week ending September 20. Foreign currency assets (FCA) rose by $10.4 billion to $616 billion, according to weekly data released by the Reserve Bank of India. Expressed in dollar terms, the FCA continues to include the effect of growth or weakness in non-US currencies such as the euro, pound and yen held in foreign exchange reserves.
At the same time, during the week under review, gold reserves registered an increase of two billion dollars and amounted to 65.7 billion dollars. The SDR (Special Drawing Rights) saw a slight increase of eight million dollars during the said week to 18.547 billion dollars. During this time, the reserve position in the IMF decreased by $71 million to $4.3 billion. According to Bank of America, India’s foreign exchange reserves will rise to $745 billion by March 2026, giving the Reserve Bank of India more potential power to influence the rupee.
Bloomberg has quoted Bank of America analysts Rahul Bajoria and Abhay Gupta as saying that the monetary authority is “sure about having large foreign exchange reserves because of its willingness to create a buffer against accidental external risks” He said the adequacy of India’s foreign exchange reserves appears to be stronger than other major emerging markets, but not necessarily much higher. This amount provides stability to the rupee against external shocks. The RBI uses its reserves to limit excessive fluctuations in the Indian currency hovering near record lows.
The RBI periodically intervenes in the market through liquidity management, including dollar sales, to prevent a sharp fall in the rupee. The RBI closely monitors the foreign exchange markets and intervenes on its part only to maintain orderly market conditions by controlling excessive volatility in the exchange rate, not taking into account any pre-determined target level or band.
