Monday, 19 May, 2025
Foreign currency maintained by a country's central bank is known as its Forex reserves. Image Source: IANS
According to the RBI's Weekly Statistical Supplement, foreign currency assets (FCAs) declined by $1.6 billion, settling at $558.86 billion.
India's foreign exchange reserves rose to $658.8 billion for the week ending March 28, 2025, marking an increase of $4.5 billion, as per the latest data from the Reserve Bank of India (RBI) released on Friday. This follows a more modest rise to $654.27 billion in the previous week, ending March 14, 2025, which saw an increase of $305 million. According to the RBI's Weekly Statistical Supplement, foreign currency assets (FCAs) declined by $1.6 billion, settling at $558.86 billion. FCAs, which reflect the value of non-dollar currencies like the euro, pound, and yen held in India's reserves, are impacted by fluctuations in the exchange rates of these currencies.
India's gold reserves experienced a significant rise of $2.8 billion, reaching a total of $77.2 billion. However, the country's Special Drawing Rights (SDRs) saw a decline of $22 million, bringing the total to $18.24 billion for the week. Additionally, India's reserve position with the International Monetary Fund (IMF) fell by $2 million, settling at $4.4 billion.
India's reserves had peaked at a record $704.89 billion in September, but have since fallen by nearly 7 percent. Experts attribute much of this decline to interventions by the Reserve Bank of India (RBI), which have primarily aimed at managing the sharp depreciation of the rupee. At present, the Indian rupee is near its record low against the US dollar.
Source: Reserve Bank of India
Foreign currency maintained by a country's central bank is known as its Forex reserves. It offers protection from unforeseen external shocks. Typically, reserve currencies like the dollar are used to maintain it. The fundamental goal of holding foreign exchange reserves is to preserve confidence in the monetary and exchange rate management policies as well as to preserve currency liquidity to absorb external shocks. Also, having sufficient reserves helps reassure investors in times of extreme uncertainty, such as wars or unrest, portrays a positive image, and reassures trading countries.
Talking about India’s foreign exchange reserves in the Rajya Sabha on Tuesday, Finance Minister Nirmala Sitharaman said that India ranks as the fourth-largest holder of foreign exchange reserves, with a total of $658.8 billion, which is sufficient to cover the country's imports for the next 11 months. Responding to additional questions during the question hour, she reassured lawmakers about their concerns regarding the foreign exchange reserves and the current account deficit.
"I want to assure you that total foreign exchange reserves as of March 25, 2025, is $658.8 billion. We are the fourth largest in terms of foreign exchange reserves that any country holds. Which means the amount that we hold in foreign exchange reserve is good enough to take care of 11 months of our imports. Even though there has been a little fall in the foreign exchange reserve, today the position is that we are the fourth largest in terms of foreign exchange reserves that we hold,” the finance minister said.
India holds the position of the fourth-largest country in terms of foreign exchange reserves, trailing only behind China, Japan, and Switzerland.
In her written response to a starred question about the rupee's depreciation, Finance Minister Nirmala Sitharaman explained that the exchange rate of the Indian Rupee (INR) against the US Dollar (USD) is influenced by a variety of domestic and global factors. These include fluctuations in the Dollar Index, trends in capital flows, interest rates, crude oil prices, and the current account deficit.
Sitharaman noted that since the beginning of the last quarter of 2024, the rupee, like many other major Asian currencies, weakened against the US dollar due to global uncertainties.
"From October 1, 2024, to March 26, 2025, the US Dollar Index rose by 3.7 percent, causing a depreciation of all Asian currencies against the USD. During this period, the rupee depreciated by 2.2 percent against the US dollar, the smallest decline among major Asian currencies," she said.
She also highlighted that foreign portfolio investment (FPI) outflows of approximately $19.9 billion from Indian markets between October 1, 2024, and March 26, 2025, contributed to the rupee's decline.
