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Friday, December 04, 2020

Forex reserves surge $5.4 billion to all-time high

During the reporting week, the surge in the forex kitty was mainly on account of an increase in foreign currency assets (FCA), a major component of the overall reserves.

By: ENS Economic Bureau | New Delhi | November 1, 2020 1:00:52 am
In the previous week ended October 16, the reserves stood at $555.12 billion after increasing by $3.615 billion. (File)

The country’s foreign exchange reserves swelled by $5.412 billion to touch an all-time high of $560.532 billion in the week ended October 23, RBI data showed on Friday.

In the previous week ended October 16, the reserves stood at $555.12 billion after increasing by $3.615 billion.

During the reporting week, the surge in the forex kitty was mainly on account of an increase in foreign currency assets (FCA), a major component of the overall reserves.

FCA rose by $5.202 billion to $517.524 billion, the RBI’s weekly data showed.

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

The gold reserves were up by $175 million in the reporting week to $36.860 billion, as per the central bank data.

The special drawing rights with the International Monetary Fund (IMF) rose by $8 million to $1.487 billion.

The country’s reserve position with the IMF also climbed by $27 million to $4.661 billion during the reporting week, the data showed.

Forex reserves are external assets in the form of gold, SDRs (special drawing rights of the IMF) and foreign currency assets (capital inflows to the capital markets, FDI and external commercial borrowings) accumulated by India and controlled by the Reserve Bank of India.

The major reason for the rise in forex reserves is the rise in investment in foreign portfolio investors in Indian stocks and foreign direct investments (FDIs). On the other hand, the fall in crude oil prices has brought down the oil import bill, saving precious foreign exchange.

The rising forex reserves give a lot of comfort to the government and the Reserve Bank of India in managing India’s external and internal financial issues at a time when the economic growth is set to contract in 2020-21. It’s a big cushion in the event of any crisis on the economic front and enough to cover the import bill of the country for a year. The rising reserves have also helped the rupee to strengthen against the dollar.

– With PTI

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