THE COUNTRY’S FOREIGN exchange reserves crossed the $600-billion mark again during the week ended May 27, according to the Reserve Bank of India (RBI).
Forex reserves rose by $3.85 billion to touch $601.36 billion during the week, the RBI said. Forex reserves had recently declined from the record high of $642.45 billion registered on September 3, 2021.
A major reason for the decline in forex reserves is capital outflows by foreign portfolio investors (FPIs) who pulled out $21.43 billion since September 2021 as the US Federal Reserve started the monetary policy tightening and interest rate hikes.
The biggest fall was in March when FPIs pulled out $6.56 billion. The demand for dollars also remained high as Russia- Ukraine war led to a spike in oil and commodify prices apart from the depreciation of other currencies.
The valuation loss, reflecting the appreciation of the US dollar against major currencies and decline in gold prices have also played a part in the decline in foreign exchange reserves.
Movements in the foreign currency assets (FCA) occur mainly on account of the purchase and sale of foreign exchange by RBI, income arising out of the deployment of the foreign exchange reserves, external aid receipts of the central government and changes on account of revaluation of the assets.
As of the end of March 2022, the RBI held 760.42 metric tonnes of gold (including gold deposits of 11.08 metric tonnes).
While 453.52 metric tonnes of gold is held overseas in safe custody with the Bank of England and the Bank for International Settlements (BIS), 295.82 metric tonnes of gold is held domestically.
In value terms, the share of gold in the total foreign exchange reserves increased from about 5.88% as at end-September 2021 to about 7.01% as of end-March 2022, it said.