India’s foreign exchange reserves have climbed to a record $785.7 billion, following a sharp increase in dollar inflows and measures introduced by the central bank to strengthen the country’s balance of payments.
According to data from the Reserve Bank of India released on Friday, reserves increased by nearly $45 billion in the week ending September 4, marking the 10th consecutive week of growth. Overall, India’s reserves have risen by almost $120 billion over the past 10 weeks.
The increase was largely driven by a $47.4 billion rise in foreign currency assets, which reached $648.2 billion. However, the value of the country’s gold reserves fell by about $2.6 billion to $113.8 billion.
India introduced several measures in June to attract more foreign currency, including discounted hedging facilities for overseas borrowing by state-owned companies and banks, as well as free hedging facilities for banks seeking overseas foreign exchange deposits.
The RBI said it received $136.3 billion through the schemes between June 5 and August 31, including an unexpectedly large $127 billion in deposits from non-resident Indians.
Bankers said the central bank’s interventions in the foreign exchange market to support the Indian rupee may have offset some of the impact of the increased dollar inflows.
Economists also noted that while the inflows have boosted India’s headline foreign exchange reserves, some of the funds are reflected as future liabilities in the central bank’s forward positions.
Tanay Dalal, an economist at Axis Bank, said the reserves could eventually stabilise around $750 billion if the RBI brings forward some of its existing dollar sales over the next 12 months.
India’s latest reserve figures include $648.2 billion in foreign currency assets, $113.8 billion in gold, $18.8 billion in Special Drawing Rights and $4.9 billion in reserve tranche position.
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