Reserve Bank of India (RBI) During the week ending August 26, according to data from Indian foreign exchange reserves $ 3.007 billion fell to $ 561.046 billion. The main reason for the decline in reserves was the decline in foreign exchange holdings (FCA). FCA fell from $ 2.571 billion to $ 498.645 billion in the week under review.
The data showed that gold reserves fell by $ 271 million to $ 39.643 billion. Special Drawing Rights (SDRs) decreased by $ 155 million to $ 17.832 billion. As the data show, the country’s reserve position with the IMF also fell by $ 10 million to $ 4.926 billion during the week under review.
What does RBI say?
There is also a sign of an economic slowdown in the world behind the decline in foreign exchange reserves. The Reserve Bank of India constantly tries to control it. His intervention reduced the rate of depletion of foreign exchange reserves during the volatility of the currency market. This is stated in the study by RBI officials. The study covers the current fluctuations caused by the Russian-Ukrainian war since 2007. The central bank has a declared policy of interference in the foreign exchange market. The central bank intervenes if it sees volatility in the market. However, the Reserve Bank never provides a target level for the currency.
The reason is the Ukraine-Russia war
The study by Saurabh Nath, Vikram Rajput and Gopalakrishnan S of the RBI’s Department of Financial Market Operations found that during the 2008-2009 global financial crisis, reserves fell by 22%. It fell only 6% during the volatility generated after the war between Ukraine and Russia. The study indicates that the views expressed here are those of the authors and do not necessarily reflect the views of the central bank.
The Reserve Bank succeeded in meeting its foreign exchange reserve intervention target. This is reflected in the low depletion rate of foreign exchange reserves. According to the study, in absolute terms, the 2008-2009 global financial crisis led to a $ 70 billion drop in reserves. While during the Covid-19 period, it only declined by $ 17 billion. At the same time, due to the Russian-Ukrainian war, there was a drop of $ 56 billion until July 29 this year.
The main factors affecting volatility include interest rates, inflation, government debt, current account deficit, commodity dependence, political stability and global developments, according to the study.
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