India’s foreign exchange reserves fall by $7.5 billion to $681.4 billion: RBI
New Delhi, May 29: Reserve Bank of India reported that India’s foreign exchange reserves declined by $7.511 billion to $681.384 billion for the week ended May 22. The sharp fall comes amid pressure on the rupee, declining foreign currency assets, and a drop in gold reserves.
Forex reserves continue to decline
The latest decline follows another significant fall of $8.094 billion recorded in the previous reporting week. India’s forex reserves had earlier reached a record high of $728.494 billion in late February before global geopolitical tensions and currency market pressures triggered a reversal.
Analysts say the reserves have been affected partly due to interventions by the RBI in the foreign exchange market to support the rupee through dollar sales.
Foreign currency assets see major drop
Foreign currency assets (FCAs), which form the largest component of India’s forex reserves, declined by $2.872 billion to $543.032 billion during the reporting week.
These assets include the impact of fluctuations in non-US currencies such as the euro, pound, and yen held within the reserves.
Movements in global currency valuations often influence the overall value of foreign currency assets even without direct transactions.
Gold reserves also decline sharply
India’s gold reserves witnessed a substantial decline during the week. According to RBI data, the value of gold holdings fell by $4.53 billion to $114.786 billion.
Gold forms an important part of India’s reserve assets and is often impacted by fluctuations in global gold prices and valuation changes.
SDRs and IMF reserve position decline
The country’s Special Drawing Rights (SDRs) with the International Monetary Fund also fell by $77 million to $18.748 billion.
Additionally, India’s reserve position with the International Monetary Fund declined by $33 million to $4.818 billion.
Why forex reserves matter
Foreign exchange reserves are crucial for maintaining currency stability, managing external shocks, and supporting imports. Strong reserves also improve investor confidence and help central banks intervene during periods of excessive volatility in currency markets.
The recent decline reflects a combination of global market pressures, geopolitical uncertainty, and central bank intervention aimed at stabilising the rupee.
Pressure from global uncertainties
The fall in reserves comes amid ongoing global economic uncertainty and geopolitical tensions that have affected financial markets and energy prices.
Indian authorities have also encouraged measures to conserve foreign exchange, including reducing unnecessary imports and limiting outward spending pressures.
Despite the decline, India continues to maintain one of the world’s largest foreign exchange reserve holdings.
