Bharat’s foreign exchange reserves registered a growth from USD 9.112 billion to USD 615.971 billion in the week ending December 15, 2023. Such a hike is one of the highest for a week and marks a 20-month high, as per the data released by the Reserve Bank of India (RBI) on December 22.
Forex reserves or foreign exchange reserves (FX reserves) are defined as assets that are in possession of a nation’s central bank or monetary authority. It is generally classified in reserve currencies, generally the US Dollar and to a lesser degree the Euro, Japanese Yen and Pound Sterling. The purpose of it is to back its liabilities – like the native currency issued and also reserves deposited by financial institutions or the government with the central bank.
Foreign exchange reserves of Bharat include cash, bank deposits, bonds and other financial assets denominated in currencies other than the Bharatiya rupee. Additionally, the stronger foreign currency reserves allows developing market central banks to “buffer their currencies against harsh declines by supplying dollars to the market” at times of volatility.
Bharat’s foreign currency assets (FCA) , which make up the biggest component of the forex reserves, rose USD 8.349 billion to USD 545.048 billion, as reflected in the information released by the central bank’s weekly statistical data. The bracket of FCA includes the effect of appreciation or depreciation of non-US units like the euro, pound and yen stored in the foreign exchange reserves.
Gold reserves also registered a significant jump through the week, rising by USD 446 million to USD 47.577 billion. Before December 15, Bharat’s total foreign exchange reserves rose from USD 2.816 billion to USD 606.859 billion.
In October 2021, the country’s foreign exchange reserves noted an all-time high of about USD 645 billion. The decline post this is associated with a rise in the cost of imported goods in 2022.
The reason was the relative fall in forex reserves is largely due to the RBI intervening in the market to defend the subsequent depreciation in the rupee against a surging US dollar.
