India’s Forex Reserves Dip by $1.78 Billion, RBI Intervention Suspected

Foreign exchange reserves decline amid RBI’s efforts to stabilize the Rupee, now near its all-time low against the US dollar.

New Delhi, March 9: India’s foreign exchange reserves witnessed a sharp decline of USD 1.781 billion, bringing the total to USD 638.698 billion for the week ending February 28, as per the latest data released by the Reserve Bank of India (RBI).

The rollercoaster movement in forex reserves continues, with weeks of gains followed by declines. This comes after reserves had slumped for nearly four months, reaching an 11-month low.

Forex Reserves Nearly 10% Below Peak Levels

“India’s forex reserves had touched an all-time high of USD 704.89 billion in September but have since dropped nearly 10% from that peak,” the RBI data revealed.

The latest dip is likely a result of RBI intervention aimed at preventing a sharp depreciation of the Rupee, which currently hovers at or near its historic low against the US dollar.

Breakdown of Forex Reserves

• Foreign Currency Assets (FCA): USD 543.350 billion (largest component of forex reserves).
• Gold Reserves: USD 73.272 billion.

Despite the decline, India’s reserves are still sufficient to cover approximately 10-11 months of projected imports.

RBI’s Strategy to Manage Rupee Volatility

“The RBI often intervenes in the forex market by selling dollars to prevent sharp Rupee depreciation and buying when the Rupee is strong,” financial analysts noted.

In 2023, India added nearly USD 58 billion to its forex reserves, a stark contrast to the USD 71 billion decline in 2022. In 2024, the reserves have risen by over USD 20 billion so far.

As global market conditions fluctuate and currency volatility remains high, RBI’s monetary strategy will continue to play a crucial role in managing India’s forex position.

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Tags: Forex Reserves, RBI, Rupee vs Dollar, Indian Economy, Foreign Exchange, Reserve Bank of India, Rupee Depreciation, Gold Reserves, Indian Forex Data, Currency Market