India's foreign exchange reserves shot up by another $2.29 billion to $698.95 billion for the week ended June 13, data released by the RBI on Friday showed.
The country’s forex kitty stood at $696.66 billion in the preceding week ended on June 6, registering an increase $5.17 billion. With a close to $7.5 billion rise over the fortnight, India’s foreign exchange reserves are nearing the all-time high of $704.885 billion that was recorded at September-end last year.
For the week ending on June 13, foreign currency assets, a major component of the reserves, increased $1.73 billion to $589.42 billion.
The gold component of the country’s forex reserves increased by $428 million to $86.32 billion during the week, according to the RBI figures. Central banks worldwide are increasingly accumulating gold as a safe-haven asset in their foreign exchange reserves amid uncertainty created by geopolitical tensions. The share of gold maintained by the Reserve Bank in its foreign exchange reserves has almost doubled since 2021.
The special drawing rights were up $85 million during the week at 18.76 billion. India's reserve position with the IMF also increased by $43 million at $4.45 billion in the reporting week, the RBI data showed.
India's foreign exchange reserves are sufficient to fund more than 11 months of goods imports and about 96 per cent of external debt outstanding, RBI Governor Sanjay Malhotra said earlier this month after the monetary policy review.
The RBI Governor said: "Overall, India’s external sector remains resilient as key external sector vulnerability indicators continue to improve. We remain confident of meeting our external financing requirements."
An increase in the foreign exchange reserves reflects strong fundamentals of the economy and gives the RBI more headroom to stabilise the rupee when it turns volatile.
A strong forex kitty enables the RBI to intervene in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall.
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