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India’s forex reserves cross $600 billion mark

Date - 16th Jun 2021

India's foreign exchange reserves topped the $ 600 billion mark for the first time, according to the latest data from the Reserve Bank of India (RBI) on Friday, June 11, 2021. The country's foreign exchange reserves increased by $ 6.842 billion, reaching $ 605 billion. The week ended June 4, 2021, is now just $ 200 million behind Russia in foreign exchange reserves.

Shaktikanta Das, RBI Governor, said:

"The current level of foreign exchange reserves is sufficient to cover almost 16 months of imports." The central bank has earned enough resources with increased reserves to tackle any problems arising from sudden political or geopolitical shifts that could drain funds from India.

How did India's foreign exchange reserves exceed the $ 600 billion mark?

The increase in the country's foreign exchange reserves for the reporting week ended June 4, 2021 is mainly attributable to an increase in the value of foreign currency assets (FCA) held by the central bank. According to the data, foreign exchange assets (FCA), which make up the main component of total central bank reserves, increased by $ 7.362 billion to $ 560.890 billion. Foreign currency assets (FCA) reflect the depreciation or appreciation of non-US currencies such as the yen, euro or pound held in foreign exchange reserves.

During the reporting week, RBI's foreign exchange reserves also fell by $ 502 million to $ 37.604 billion. Although, after the unstable end of the 21st fiscal year, the country's foreign exchange reserves have grown due to the continued inflow of foreign investment into the capital markets. RBI's strategy of buying dollars during a sudden surge in capital inflows has led to the accumulation of foreign exchange reserves.

In financial year 21, according to the CDSL, the country reported $ 37 billion in net inflows that were recorded through purchases by foreign funds, with an additional $ 400 million in net inflows added to them. During the reporting week, the country's reserve position in the International Monetary Fund (IMF) also fell by $ 16 million to $ 5 billion, and the Special Drawing Rights (SDR) in the IMF also fell by $ 1 million to $ 1.513 billion.

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