India’s Forex reserves reach record high of $704.89 billion

This historic peak follows a rise of $2.8 billion, bringing reserves to $692.3 billion for the week ending September 20.

The RBI’s Weekly Statistical Supplement showed that foreign currency assets (FCAs) rose by $10.4 billion to $616 billion.

In dollar terms, FCAs include the effect of appreciation or depreciation of non-US currencies such as the euro, pound, and yen held in reserves.

Gold reserves saw an increase of $2 billion, reaching $65.7 billion, while Special Drawing Rights (SDRs) saw a slight uptick of $8 million, standing at $18.547 billion.

However, the reserve position in the International Monetary Fund (IMF) fell by $71 million, now at $4.3 billion.

According to Bank of America, India’s foreign exchange reserves are projected to rise to $745 billion by March 2026, improving the RBI's ability to manage the rupee.

BofA analysts Rahul Bajoria and Abhay Gupta, quoted by Bloomberg, noted that while India's reserve adequacy is strong compared to other major emerging markets, it is not excessive.

The reserves provide stability to the rupee against external shocks, allowing the RBI utilizing them to mitigate extreme currency fluctuations.

The RBI regularly intervenes in the forex market through liquidity management, including selling dollars to curb sharp depreciations in the rupee.

The central bank closely monitors foreign exchange markets and intervenes to maintain orderly conditions by managing excessive volatility, without targeting specific levels for the exchange rate.