According to the data released by the Reserve Bank of India (RBI), India experienced a decrease of USD 2.795 billion, in its foreign exchange reserves, reaching USD 616.143 billion by the end of January 19, 2023. The statistical data from the bank shows that during the period, India’s largest component of forex reserves, known as foreign currency assets (FCA) decreased by USD 2.653 billion to USD 545.855 billion. Additionally, gold reserves saw a dip of USD 34 million and settled at USD 47.212 billion.
Throughout the calendar year 2023, the RBI increased its foreign exchange reserves by USD 58 billion after experiencing a decline of USD 71 billion in India’s forex reserves throughout 2022. Foreign exchange reserves, also referred to as FX reserves, represent assets held by a national bank or monetary authority and are typically denominated in reserve currencies such as the US Dollar, Euro, Japanese Yen, and Pound Sterling.
India reached an all time in foreign exchange reserves around USD 645 billion in October 2021. Has seen a slight decline since then due in part, to higher import costs in 2022. Furthermore, the decrease in reserves may be connected to the RBI’s involvement in the market to counterbalance the uneven decline of the rupee against a strengthening US dollar.
The RBI utilizes interventions such as managing liquidity, which involves selling dollars to avoid a depreciation of the rupee. These actions are undertaken to maintain orderly market conditions and curb excessive volatility in the exchange rate. Importantly, the RBI’s interventions are not tied to any predetermined target level or band, as it closely monitors foreign exchange markets. This approach underscores the central bank’s commitment to ensuring stability in the currency market without adhering to rigid exchange rate benchmarks.
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