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India’s forex reserves soar to $654bn in record rise

India’s foreign exchange reserves saw a significant jump, marking their largest weekly gain in more than three years.

News Arena Network - New Delhi - UPDATED: March 15, 2025, 03:08 PM - 2 min read

Forex reserves jump $15.3 billion amid RBI’s currency swaps.


India’s foreign exchange reserves saw a significant jump, marking their largest weekly gain in more than three years.

 

The increase, driven by the Reserve Bank of India's (RBI) recent liquidity-boosting measures and foreign exchange swap operations, highlights the central bank’s efforts to stabilise the financial system.

 

According to the latest data, India’s forex reserves surged by approximately $15.3 billion, reaching nearly $654 billion in the week ending March 7, 2025.

 

Agency and local media reports that this is the highest weekly increase since August 27, 2021. 

 

The sharp rise follows RBI’s $10 billion injection through a foreign-exchange swap auction on February 28, aimed at addressing a liquidity crunch in the banking sector.

RBI’s Liquidity Injection and Currency Swaps

The RBI’s recent interventions have played a crucial role in boosting reserves. Through its forex swap mechanism, the central bank purchased dollars from banks in exchange for rupees, with a contract to sell them back at a later date.

 

This move not only strengthened forex reserves but also provided much-needed liquidity to the financial markets.

 

February saw an infusion of nearly $47 billion into the banking system, easing one of the worst liquidity deficits in recent years.

 

The liquidity squeeze had been exacerbated by global financial volatility, concerns over US trade policies, and RBI’s past interventions to stabilise the rupee.

Impact on the Rupee and Market Liquidity

Following the RBI’s forex swap auction, the Indian rupee saw increased pressure, briefly depreciating by 0.3% to 87.49 per US dollar.

 

The currency has been facing challenges due to global uncertainties, including inflationary concerns in the US and fears of trade restrictions affecting emerging economies.

 

India’s banking system has been grappling with liquidity shortages since late 2024.

 

The deficit reached a 14-year high of ₹3.3 lakh crore in January, prompting the RBI to introduce a series of liquidity-boosting measures. 

 

These included open-market bond purchases worth ₹1 trillion and earlier forex swaps amounting to $5 billion.

RBI’s Ongoing Efforts to Stabilise the Financial System

To further ease liquidity constraints, the central bank recently announced additional measures, including government bond purchases under open market operations (OMO) and new forex swap arrangements.

 

These steps aim to ensure that banks have sufficient liquidity to support economic activity while maintaining financial stability.

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