Key Points

In the previous reporting week, the country's foreign exchange reserves fell by USD 1.18 billion to USD 695.49 billion.

In the week ending July 25, foreign currency assets, the major constituent of the forex reserves, rose USD 1.316 billion, at USD 588.926 billion, possibly becoming the primary reason for the uptick in the forex reserves.

The Gold reserves, another major component of the forex, again witnessed an uptick, increasing by USD 1.206 billion to USD 85.704 billion.

India's Special Drawing Rights (SDRs) with the global financial body, the International Monetary Fund (IMF), increased by USD 126 million, reaching USD 18.809 billion.

Central banks worldwide are increasingly accumulating safe-haven gold in their foreign exchange reserves kitty, and India is no exception. The share of gold maintained by the Reserve Bank of India (RBI) in its foreign exchange reserves has almost doubled since 2021, till recently.

In 2023, India added around USD 58 billion to its foreign exchange reserves, contrasting with a cumulative decline of USD 71 billion in 2022. In 2024, the reserves rose by a little over USD 20 billion, touching an all-time high of USD 704.885 billion at the end of September 2024.

India's foreign exchange reserves (Forex) are sufficient to meet 11 months of the country's imports and about 96 per cent of external debt, said Governor Sanjay Malhotra while announcing the outcome of the Monetary Policy Committee (MPC) decisions.

Foreign exchange reserves, or FX reserves, are assets held by a nation's central bank or monetary authority, primarily in reserve currencies such as the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling.

The RBI often intervenes by managing liquidity, including selling dollars, to prevent steep Rupee depreciation. The RBI strategically buys dollars when the Rupee is strong and sells when it weakens.

- ANI