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India’s foreign exchange reserves surged by $12.4 billion to a record $729.32 billion in the week ended August 21, supported by inflows through the special deposit window, according to RBI data released on Friday. The previous record high was at $728.5 billion at the end of February.
Within the reserves, foreign currency assets increased by $9.4 billion to $591.3 billion, while gold reserves rose by $2.8 billion to $114.2 billion in the week ended August 21, the RBI data showed.
Inflows through FCNR(B) deposits were a key contributor to the RBI’s reserve buildup, said market participants. Banks had mobilised $65.4 billion through FCNR(B) deposits as of August 21, the latest RBI data showed. Including external commercial borrowings and overseas foreign currency borrowings, total inflows stood at $72.8 billion. The RBI introduced these measures in June to support the rupee and help bridge the balance of payments gap.
Since the measures came into effect on June 8, India’s forex reserves have risen by $47.7 billion, while the rupee has strengthened 1.5% from its record low in May. The rupee ended at 95.38 against the dollar on Friday.
“The reserve accumulation materially strengthens India’s external shock absorber. It gives the RBI capacity to smooth disorderly rupee depreciation, finance essential imports during oil-price or geopolitical shocks, and reassure foreign investors about external-payment resilience. However, the quality and durability of the increase matter,” said Dr. Manoranjan Sharma, Chief Economist, Infomerics Ratings.
TOPICSforexThis article was first uploaded on August twenty-eight, twenty twenty-six, at fifty-four minutes past nine in the night. © The Indian Express (P) Ltd