India's forex reserves surge $6.55B to over $625B
What's the story
India's forex reserves have experienced a significant boost, with an increase of $6.55 billion, reaching a total of $625.63 billion as of March 1, according to the latest data from the Reserve Bank of India (RBI). This growth comes on the heels of a previous rise of $2.98 billion, which brought the reserves to $619.07 billion for the week ending February 23, 2024.
Factors responsible
FCAs and gold reserves witnessed a rise
A key factor in this increase is the growth of foreign currency assets (FCAs), which rose by $6.04 billion to a total of $554.23 billion during the week ending March 1. FCAs, when expressed in dollar terms, account for fluctuations in non-US currencies such as the euro, pound, and yen within the forex reserves. Additionally, gold reserves saw an uptick of $569 million, reaching $48.42 billion during the same time frame.
Information
SDRs and reserve position with IMF decline
Despite the overall growth in forex reserves, Special Drawing Rights (SDRs) experienced a slight decline of $17 million, settling at $18.18 billion. Furthermore, India's reserve position with the International Monetary Fund (IMF) decreased by $41 million to $4.8 billion during the reporting week.
Role
How RBI maintains rupee stability
The RBI intervenes periodically in the market to manage liquidity. This is done often by selling dollars, to prevent a sharp decline in the Indian rupee (INR)'s value. The banking organization watches foreign exchange markets and intervenes to ensure orderly conditions, aiming to control excessive volatility in exchange rates, without adhering to any predetermined target level or range.