India's Forex Reserves Fall to $625.87 Billion Amid Rupee Depreciation

India's foreign exchange reserves continued to decline for the sixth consecutive week, as of January 10, at USD 625.87 billion, according to the weekly data released by the Reserve Bank of India. According to the latest data from the central bank, the country's foreign exchange reserves declined by USD 8.72 billion to USD 625.871 billion as of January 10, its lowest level in ten months.

The reserves had been declining since touching an all-time high of USD 704.89 billion in September. The reserves are depleting due to aggressive RBI intervention to prevent a sharp fall in the rupee. The Indian rupee is now at an all-time low against the US dollar, having fallen above 86 points against the US dollar.

The latest data from the RBI showed that India's foreign currency assets (FCAs), which are the largest component of foreign exchange reserves, reached USD 536.011 billion. According to RBI data, the gold reserves currently stand at USD 67.883 billion, showing an increase of USD 792 million. Despite the decline seen in recent months, the RBI assured in December that the foreign exchange reserves are sufficient to meet more than 11 months of imports and about 96 per cent of the outstanding external debt by the end of June 2024.

The RBI said in the bulletin that the country's foreign exchange reserves remain strong. In 2023, India added around USD 58 billion to its foreign exchange reserves, while in 2022 it declined cumulatively by USD 71 billion.

Foreign exchange reserves, or FX reserves, are assets held by a country's central bank or monetary authority, primarily in reserve currencies such as the U.S. dollar, with a smaller portion denominated in euros, Japanese yens, and pounds sterling. The RBI monitors the foreign exchange markets closely, intervening only to maintain orderly market conditions and prevent excessive volatility in the exchange rate of the rupee.