RBI likely to keep shoring up reserves as Re gains: DBS

Apr 03 2014, 19:45 IST
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The reserves had surged to an all-time high of USD 322 billion in September 2011. (Reuters) The reserves had surged to an all-time high of USD 322 billion in September 2011. (Reuters)
SummaryThe Reserve Bank is likely to continue buying dollars from market to add to its reserves in the coming months, which has crossed USD 300 billion, says a report.

The Reserve Bank is likely to continue buying dollars from market to add to its reserves in the coming months, which has crossed USD 300 billion, says a report.

"The RBI is likely to remain focused on building foreign reserves in the months ahead, with the present phase of spare capacity and weak demand conditions lowering the inflationary threat," DBS Bank said in a report here today.

The forex reserves rose to USD 298.6 billion in the week ending March 21, which was the highest since December 2011 when it touched USD 300 billion. But the Finance Minister had on March 31 said that the reserves had crossed USD 300 billion by that day.

The reserves had surged to an all-time high of USD 322 billion in September 2011.

In a conference call with analysts, RBI Governor Raghuram Rajan had yesterday said at the current level of the rupee if there is a need to reduce volatility, the RBI may go to the market and buy dollars.

But in a media interview post-policy, Rajan had suggested that the comfortable reserve level could be around the Chinese levels, which is over USD 3.66 trillion as of end 2013, which is the world's highest.

The current rise in reserves is on account of absorption of inflows that followed RBI's concessional swap arrangement for banks and non-resident deposits coupled with strong FII interests in equities and debt.

According to the report, justification for higher foreign reserves also stem from the rise in external debt.

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