India’s forex reserves surge by record $44.9 billion to lifetime high of $785.7 billion

India’s foreign exchange reserves surged by a record $44.903 billion to a fresh lifetime high of $785.706 billion in the week ended September 4, according to data released by the Reserve Bank of India (RBI) on Friday.

The latest increase follows a rise of $11.475 billion in the previous reporting week, when the reserves stood at $740.803 billion. The sharp accretion marks a significant strengthening of the country’s external liquidity position after months of pressure on the rupee.

Forex swap initiatives boost inflows

India’s forex reserves had been declining since the escalation of the West Asia conflict earlier this year, as the rupee came under pressure and the RBI intervened in the foreign exchange market through dollar sales.

The reserves, however, began rising after the central bank announced concessional foreign exchange swap initiatives in June amid a sharp depreciation in the domestic currency. The initiatives have generated more than $136 billion in new flows, helping bolster the country’s foreign exchange liquidity.

The latest increase also comes after nine consecutive weekly rises in the reserves. The previous record of $740.803 billion, reported for the week ended August 28, had surpassed the earlier peak of $728.494 billion recorded in the week ended February 27.

Foreign currency assets drive increase

Foreign currency assets (FCAs), the largest component of India’s forex reserves, rose by $47.498 billion to $648.168 billion during the week ended September 4, the RBI data showed.

Expressed in dollar terms, FCAs reflect the impact of appreciation or depreciation in non-US currencies, including the euro, pound and yen, held in the reserves.

Gold reserves decline

While foreign currency assets recorded a sharp increase, the value of India’s gold reserves declined by $2.594 billion to $113.816 billion during the reporting week.

The RBI’s data also showed that special drawing rights (SDRs) fell by $4 million to $18.806 billion. India’s reserve position with the International Monetary Fund (IMF), meanwhile, increased by $2 million to $4.916 billion.

The latest data underscores the impact of the central bank's liquidity and foreign exchange management measures in rebuilding the country’s reserves after the pressure witnessed earlier this year.