India’s foreign exchange reserves declined by $1.8 billion to $638.7 billion for the week ending 28 February, according to the latest data released by the Reserve Bank of India (RBI).
The forex reserves, which had previously witnessed a four-month slump reaching an 11-month low, have fluctuated in recent weeks, alternating between gains and declines. The reserves remain approximately 10 per cent below their record high of $704.89 billion, achieved in September.
Analysts suggest that the recent decline is primarily due to RBI intervention to prevent excessive depreciation of the rupee, which is currently hovering near its all-time low against the US dollar.
The RBI’s weekly statistical supplement indicates that India’s foreign currency assets (FCA), which constitute the largest portion of the reserves, stood at $543.35 billion.
Meanwhile, gold reserves were valued at $73.27 billion.
Also read: RBI’s cash boost helps ease India’s liquidity crunch
Estimates indicate that the current forex reserves are adequate to cover approximately 10 to 11 months of projected imports, ensuring a buffer against external economic shocks.
India had added nearly $58 billion to its forex reserves in 2023, reversing the trend from 2022 when the reserves witnessed a cumulative decline of $71 billion. In 2024, the reserves increased by just over $20 billion.
Foreign exchange reserves, managed by the RBI, consist of assets held in major global currencies, predominantly the US dollar, alongside smaller holdings in the euro, Japanese yen, and pound sterling.
The central bank frequently intervenes in currency markets, strategically purchasing dollars when the rupee is strong and selling them to stabilise volatility when the rupee weakens.
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