MUMBAI: India’s FX reserves climbed to a record high of USD785.7 billion in the week to September 4, central bank data showed on Friday, lifted by a wave of inflows under policy measures to strengthen the country’s balance of payments.
India’s FX pile has risen for ten straight weeks, jumping by almost USD120 billion during this period, with the latest data showing a nearly USD45 billion week-on-week rise.
In June, India unveiled a raft of measures to boost dollar inflows that included discounted hedging facilities for overseas borrowings by state-run firms and banks as well as a free-of-cost hedging facility for banks to raise overseas FX deposits.
The Reserve Bank of India received USD136.3 billion under these schemes between June 5 and August 31, led by a much higher-than-anticipated USD127 billion haul from non-resident Indian deposits. The scale of inflows prompted the central bank to shorten the window for its deposit hedging facility for overseas deposits by a month to August-end.
For the week ended September 4, the rise in reserves was led by a USD47.4 billion gain in the central bank’s foreign currency assets, while the value of its gold holdings dipped by about USD2.6 billion to USD113.8 billion.
The RBI’s frequent interventions in the foreign exchange market to support the rupee have likely offset the impact of some of the overseas dollar inflows, bankers said.
Analysts have also pointed out that while the dollar inflows boost the RBI’s spot FX reserves, they are reflected as a future liability in its forward book.
“Should the RBI elect to bring forward existing dollar sales in the upto 12-month horizon, the headline reserves will likely stabilize around USD750 billion,” said Tanay Dalal, an economist at Axis Bank.