India’s Forex Reserves Shrink by USD 1.268 bn to USD 561.583 bn

India’s forex reserves declined by USD 1.268 billion to USD 561.583 billion for the week ended January 6, the Reserve Bank said. The overall reserves had increased by USD 44 million to USD 562.851 billion in the previous reporting week after two consecutive weeks of the slide. In October 2021, the country’s foreign exchange kitty reached an all-time high of USD 645 billion.

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Fall In Forex Reserves:

The reserves had been declining as the central bank deployed the reserves to defend the rupee amid pressures caused by global developments. Foreign currency assets (FCA), a major component of the overall reserves, dropped by USD 1.747 billion to USD 496.441 billion during the week to January 6, according to the Weekly Statistical Supplement released by the RBI.

Foreign exchange reserves:

• Foreign exchange reserves are assets held in reserve by a central bank in foreign currencies, such as bonds, treasury bills, and other government securities. It needs to be noted that the majority of foreign exchange reserves are held in US dollars.
• India’s foreign exchange reserves include:
  • Foreign Currency Assets
  • Gold Reserves
  • Special Drawing Rights (SDR)
  • Reserve position with International Monetary Fund (IMF)

About Foreign Currency Assets:

The foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

Gold reserves increased by USD 461 million to USD 41.784 billion. The Special Drawing Rights (SDRs) were up by USD 35 million to USD 18.217 billion, the apex bank said. The country’s reserve position with the International Monetary Fund (IMF) was down by USD 18 million to USD 5.141 billion in the reporting week, the data showed.

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