$60 billion in 6 weeks: RBI’s rupee defence comes at a cost

Kolkata: India’s foreign exchange reserves have fallen by roughly $60 billion over the past six weeks as the Reserve Bank of India (RBI) aggressively sold dollars to prop up the rupee, one of Asia’s worst-performing currencies.

On October 9, the RBI’s foreign exchange reserves stood at $726.027 billion, down from the lifetime high of $785.706 billion on September 4, official data showed. This fell by $8.578 billion in the reporting week, according to the RBI’s weekly statistical supplement.

Foreign currency assets, the largest contributor to the country’s reserves, fell by $7.142 billion in that week to $597.605 billion. Over the last six weeks, this has declined by $50.563 billion, eroding 35% of $143.596 billion the central bank had garnered between June and August through dedicated dollar mobilisation schemes cum swap window.

The depletion was largely due to dollar sales by the RBI through large public sector banks to support the rupee, which was facing headwinds in the form of higher crude oil prices, rising US yields and persistent outflow of foreign capital.

National Securities Depository Ltd (NSDL) data showed that foreign portfolio investors have withdrawn a net $26.8 billion from the local markets so far this year.

India’s gold reserves fell by $1.319 billion in the week to October 8 to $105.094 billion.