Even at all time high of $645.6 billion, RBI to continue to accumulate reserves
bank will continue to accumulate foreign exchange reserves even though it is at an all-time high as it looks to strengthen its position to counter volatility due to spillovers.
India’s foreign exchange reserves stood at a record $645.6 billion as of March 29.
“We have been consciously building reserves over the past four five years as the market moves prevailing upon the market situation,” said central bank governor Shaktikanta Das at the post-policy media briefing Friday. “That effort continues because it acts as a buffer against future risks especially in situations when the cycle turns and there is significant outflow of dollars”
To be sure, reserves started depleting from September 2021 onward, after it had peaked at $642.45 billion on September 03, 2021. The Reserve Bank was selling dollars since then whenever the rupee weakened against the dollar beyond its comfort level.
“The decline then was also partly due to the valuation impact,” Das said. “The RBI used its forex reserves in a judicious manner.”
But the reserves started picking up steadily since early December 2023 and have crossed the September 2021 levels after almost two and a half years.
Governor Das, in his monetary policy statement, has said that the external sector is resilient and the latest external vulnerability is eminently manageable. The country’s forex reserves are at 99.6% of outstanding external debt at end-December 2023.
“It is our duty to build a strong buffer of reserves when it rains heavily,” Das said. ”This whole approach adds
