NEW DELHI (CU)_Earlier this month, the gold reserves held by the Reserve Bank of India fell by a staggering $502 million to $37.604 billion. Data issued by the bank also revealed that its special drawing rights, another component of forex reserves, fell considerably by $1 million to $1.513 billion. Moreover, the South Asian nation reported a decline of $16 million in its reserve position with the IMF.
Nevertheless, after a volatile end to FY21, increased foreign investments in the first quarter of this year has led to a steady growth in the central bank’s foreign reserves. And now, for the first time ever, the RBI’s foreign exchange reserves crossed the $600 billion mark by leaping $6.842 billion to $605.008 billion. According to the bank reports, this increase was mainly on the back of a rise in the value of its foreign currency assets (FCA), which constitute a major component of the overall reserves. Data showed that the FCA held by the bank rose by $7.362 billion to $560.89 billion.
A strong kitty enables the central bank to avoid any slide in rupee devaluations by allowing it to make timely interventions in forward and spot currency markets. This is why the RBI has been shoring up its foreign reserves for over a year now and as a result, India has surpassed Russia and South Korea to become the fourth-biggest holder of foreign exchange reserves. The countries currently ahead of India are China, Japan and Switzerland.
