India’s forex reserves rise $4.88 bn to reach all-time high of $728.49 bn in last week

India’s foreign exchange reserves rose by $4.885 billion to touch an all-time high of $728.494 billion in the week ended February 27, according to data released by the Reserve Bank of India (RBI) on Friday. 

In the previous reporting week, the country’s overall reserves had declined by $2.119 billion to $723.608 billion. The earlier record high for the reserves stood at $725.727 billion in the week ended February 13. 

Gold reserves lead the increase in forex 

The current rise in reserves was largely supported by a sharp increase in gold reserves. According to the RBI data, the value of gold reserves climbed by $4.141 billion to $131.630 billion during the week. 

Meanwhile, the foreign currency assets (FCAs), which form the largest component of the reserves, increased by $561 million to $573.125 billion. 

Expressed in dollar terms, the foreign currency assets include the impact of appreciation or depreciation of non-US currencies such as the euro, pound and yen held in the foreign exchange reserves. 

SDRs and IMF position also rise 

Special Drawing Rights (SDRs) increased by $26 million to $18.87 billion during the reporting week, the central bank said. 

India’s reserve position with the International Monetary Fund (IMF) also rose by $158 million to $4.87 billion, according to the RBI data. 

India’s forex reserves have remained robust in recent years, providing a cushion against external shocks and helping the central bank manage volatility in the currency market. 

The reserves have witnessed a steady rise over the past few years, supported by strong capital inflows, growth in exports and the RBI’s active management of the currency market. The reserves had earlier reached a peak of $642 billion in September 2021 before moderating amid global financial volatility and the central bank’s efforts to stabilise the rupee. 

The stockpile has since rebounded, helped by sustained foreign investment inflows and a narrowing current account deficit. A strong reserve position is seen as an important buffer for the economy, helping the RBI manage exchange rate volatility and providing cover for several months of imports.