India’s foreign exchange reserves rose by USD 1.2 billion to touch USD 401.942 billion in the week to December 1.
India’s foreign exchange reserves increased by USD 1.2 billion to touch USD 401.942 billion in the week to December 1, according to the RBI data.
The surge in reserves was aided by an increase in foreign currency assets, a major component of the overall reserves.
The reserves once again crossed USD 400 billion mark in the previous week, after they rose by USD 1.208 billion to USD 400.741 billion.
The foreign currency reserves increased by USD 1.151 billion to USD 377.456 billion for the reporting week, the RBI said today.
Expressed in the US dollar terms, foreign currency assets include the effect of appreciation or depreciation of the non- US currencies such as the euro, the pound and the yen held in the reserves.
After remaining stable for many months, gold reserves also rose by USD 36.5 million to USD 20.703 billion.
The special drawing rights with the International Monetary Fund rose by USD 4.9 million to USD 1.502 billion.
The country’s reserve position with the Fund also rose by USD 7.4 million to USD 2.280 billion, the Reserve Bank of India said.
India’s foreign exchange reserves rose by $240.40 million as on November 17 to $399.533 billion, data from the RBI shows. Foreign currency assets, which form a key component of reserves, rose by $220.40 million from the previous week to $375.096 billion.
India’s foreign exchange reserves rose by $240.40 million as on November 17 to $399.533 billion, data from the RBI shows.
Foreign currency assets, which form a key component of reserves, rose by $220.40 million from the previous week to $375.096 billion.
FCAs are maintained in major currencies like US dollar, euro, pound sterling, Japanese yen etc.
Movement in the FCA occur mainly on account of purchase and sale of foreign exchange by the RBI, income arising out of the deployment of foreign exchange reserves, external aid receipts of the government and revaluation of assets.
Gold reserves remained stable at $20.66 billion.
Special drawing rights (SDR) from the International Monetary Fund rose by $7.9 million from the previous week to $1.497 billion.
SDR is an international reserve asset created by the IMF and allocated to its members in proportion of their quota at the IMF.
The Reserve Position in the IMF rose by $12.1 million to $2.273 billion.
The reserves are hitting the psychological threshold also because benign current account deficits over the last few quarters had allowed RBI to use less of the reserves to finance it.
India’s foreign exchange reserves have climbed tantalizingly close to the $400-billion mark on September 1 on the back of strong foreign portfolio investments into the Indian market, especially the debt segment
The reserves are hitting the psychological threshold also because benign current account deficits over the last few quarters had allowed RBI to use less of the reserves to finance it.
To be sure, the latest $100 billion addition to the reserves has taken close to 10s years. The $300 billion mark was reached in February 2008, while the previous $100 billion was accumulated in a span of just eleven months.
While the rupee remains strong against the dollar at levels of 64 having appreciated 6% so far in 2017, few would have anticipated this strength, especially after the free fall of the currency in mid-2013 when it slipped all the way to 68.85 against the greenback (the forex reserves had plunged by more than $17 billion during this period).
The other critical period for the reserves and currency was in 2008, during the financial crisis when the currency lost almost 25% of its value between May and November. In this period, the reserves fell by a little over $70 billion to $245.8 billion.
Currently, the reserves take care of approximately 12 months of imports; in the past the reserves have typically covered seven to eight months of imports. Interestingly, India has seen the third-highest reserves accretion globally after Switzerland and China, so far in 2017.
According to Indranil Sengupta, chief economist at Bank of India Merrill Lynch, RBI has been intervening fairly aggressively in the forex market and might continue to do so if the dollar weakens but perhaps less so if the greenback was to strengthen.
After a brief overnight pause, the rupee was again caught in a downward spiral and slipped by 12 paise to 64.12 against the US dollar on Thursday on fresh demand for the American currency from banks and importers amid persistent foreign capital outflows. Foreign portfolio investors sold shares worth a net Rs 827 crore on the day.
Meanwhile, India’s CAD, which stood at 0.7% in the fourth quarter of last fiscal is expected to widen sharply to 3% in Q1FY18 due to a sharp deterioration in the merchandise trade deficit. According to Sonal Varma, chief economist at Nomura, the low commodity prices in the last two years have resulted in the CAD narrowing to about 1% of GDP. “With commodity prices marginally higher and a cyclical recovery expected in coming quarters, we expect the current account deficit to widen to a steady state of around 1.5-2.0% of GDP (for FY18),” Varma said.
Currently, as the central bank continues to shore up the reserves, it appears to be depending more on forward purchases than the spot market. This is due to the abundant liquidity in the system which prevents excessive action in the spot market.
MV Srinivasan, vice-president, Mecklai Financial Services believes the RBI is attempting to prevent any appreciation of the rupee beyond 63.80 levels. “The central bank is trying to rein in the excess liquidity in the system through OMO sales and dollar purchases in the spot will counter these measures,” he says.
Srinivasan believes that if the US Federal Reserve begins to reduce its balance sheet size, there could be forex outflows following which the RBI might intervene to stabilise the markets. Net portfolio inflows to the India’s bond and stock markets have been to the tune of $26.7 billion so far in 2017.
In the previous week, the reserves had increased by USD 1.148 billion to USD 394.55 billion.
The forex reserves surged by a massive USD 3.572 billion to touch a record high of USD 398.122 billion for the week ended September 1, on account of rise in foreign currency assets, RBI data showed on Friday.
In the previous week, the reserves had increased by USD 1.148 billion to USD 394.55 billion.
Last month, American brokerage Morgan Stanley had forecast that the reserves might touch the USD 400 billion mark in the week to September 8. And if the rise in the kitty continues with the same speed, it may cross that magic numbers next week.
The foreign currency assets (FCAs), a major component of the overall reserves, increased by USD 2.808 billion to USD 373.641 billion for the reporting week, according to the data.
Expressed in US dollar terms, FCAs include the effect of appreciation or depreciation of non-US dollar currencies, such as the euro, the pound and the yen held in the reserves.
After remaining unchanged for many weeks, gold reserves also rose by USD 748.3 million to USD 20.691 billion.
The special drawing rights with the International Monetary Fund (IMF) increased by USD 6.5 million to USD 1.506 billion, the apex bank said.
The country’s reserve position with the IMF also increased by USD 9.8 million to USD 2.283 billion, it said.
As India’s foreign-exchange reserves march toward the unprecedented $400 billion mark, its central bank faces a costly conundrum.
As India’s foreign-exchange reserves march toward the unprecedented $400 billion mark, its central bank faces a costly conundrum. To keep the rupee stable and exports competitive, it is having to mop up inflows that’s adding cash to the local banking system. Problem is, banks are flush with money following Prime Minister Narendra Modi’s demonetization program last year, leaving them already struggling to pay interest on the deposits in an environment where loans aren’t picking up. The resulting need to absorb both dollar- and rupee-liquidity is stretching the Reserve Bank of India’s range of tools and complicating policy. Costs to mop up these inflows have eroded the RBI’s earnings, halving its annual dividend to the government. “The RBI would be paying more on its sterilization bills than it gets on its reserve assets, so it would cut into its profits,” said Brad W. Setser, senior fellow at New York-based thinktank Council on Foreign Relations. “Selling sterilization paper in a country with a relatively high nominal interest rate like India is costly.”
Governor Urjit Patel aims to revert to neutral liquidity in the coming months from the current surplus. Lenders parked an average 2.9 trillion rupees ($45 billion) of excess cash with the central bank each day this month compared with 259 billion rupees the same time last year. This peaked at 5.5 trillion in March. The surge in liquidity has pushed the RBI to resume open-market bond sales as well as auctions of longer duration repos besides imposing costs on the government for special instruments such as cash management bills and market stabilization scheme bonds. Meanwhile foreign investors have poured $18.5 billion into Indian equities and bonds in the year through June, during which period the RBI has added $23.4 billion to its reserves. Its forward dollar book has also increased to a net long position of $17.1 billion end-June from a net short $7.4 billion a year ago. “My guess is reserves over 20 percent of GDP would start to raise questions about cost – but that is just a guess,” said Setser. India’s reserves have ranged between 15 and 20 percent of GDP since 2008 global crisis — a level that’s neither too low to create vulnerability or too high indicating excess intervention, he said.
Consistent buildup in the forward book may have cost the RBI some 70 billion rupees, while total liquidity-absorption costs due to the demonetization deluge from November to June were 100 billion rupees, according to calculations by Kotak Mahindra Bank Ltd. The RBI paid another 50 billion rupees to 70 billion rupees to print banknotes, the bank estimates. A weakening dollar would also have led to losses due to the foreign-currency cash pile, which has traditionally been dominated by the greenback. The Bloomberg Dollar Index has fallen 8.5 percent this year. After all these expenses, the RBI transferred 306.6 billion rupees as annual dividend to the government, compared with 749 billion rupees budgeted to come from the RBI and financial institutions. More clarity will emerge with the RBI’s annual report typically published in the final week of August. “This disturbs the fiscal math for the year through March 2018,” said Madhavi Arora, an economist at Kotak Mahindra Bank. Assuming everything else stays constant, she estimates the budget deficit may come in at 3.4 percent of gross domestic product rather than the government’s goal of 3.2 percent.
Apart from the high costs, there’s another dimension to the surge in liquidity. The RBI could face a shortage of bonds it places as collateral with its creditors. It is said to be preparing a fresh proposal to the government for creation of a window — the so-called standing deposit facility — which doesn’t require any collateral. “As the excess liquidity challenge looks set to persist, the RBI will need more tools to manage this, such as the standing deposit facility,” economists at Morgan Stanley, including Derrick Kam, wrote in an Aug. 16 note. He predicts that at the current rate of accretion, foreign-exchange reserves will hit $400 billion by Sept. 8 from $393 billion this month.
The gold reserves remained unchanged at $19.943 billion.
The country’s foreign exchange reserves rose by USD 163.8 million to touch a new life-time high of USD 393.612 billion in the week ended August 11, helped by rise in foreign currency assets (FCAs), the Reserve Bank data showed.
In the previous week, the reserves had increased by USD 581.1 million to USD 393.448 billion.
FCAs, a major portion of the overall reserves, rose by USD 175.6 million to USD 369.899 billion, the data showed.
Expressed in US dollar terms, FCAs include effect of appreciation or depreciation of non-US currencies such as the euro, the pound and the yen held in the reserves.
The gold reserves remained unchanged at USD 19.943 billion.
The special drawing rights with the International Monetary Fund (IMF) declined by USD 5.8 million to USD 1.498 billion.
The country’s reserve position with the IMF also dipped by USD 6 million to USD 2.271 billion, the apex bank said.
It already touched a new high of $393.61 billion as on August 11, 2017, and the pace of forex reserves accretion has been the strongest since 2005.
India’s foreign exchange reserves are set to hit the $400-billion mark. It already touched a new high of $393.61 billion as on August 11, 2017, and the pace of forex reserves accretion has been the strongest since 2005.
The gain in the country’s forex reserves has been one of the strongest in Asia in the past 12 months.
India remains among the top-ten countries in forex reserve position and has a comfortable import cover of 12 months, as against the norm of three months.
India’s forex reserves touched an all-time low of $5.8 billion at end of March 1991, which could barely finance three weeks’ worth of imports.
It led the Centre to airlift national gold reserves as a pledge to the IMF in exchange for a loan to cover balance of payment debts.
The rise in forex reserves has been because of robust foreign direct and institutional investment flows, which made the rupee appreciate over 6% since January this year.
As a result of high forex reserves, the Economic Survey volume 2 has highlighted that most reserve-based external sector vulnerability indicators have improved.
It led the Centre to airlift national gold reserves as a pledge to the IMF in exchange for a loan to cover balance of payment debts.