India's Forex Reserves Hit Two-Year Low To $528 Billion

Reserve Bank of India's (RBI's) foreign exchange (forex) reserves fell to a new two-year low for the week ended October 14. The reserves fell by $4.50 billion to $528.37 billion, according to data released by RBI. This is the lowest since July 24, 2020.  

The fall in forex reserves took place on account of a decline in RBI's foreign currency assets (FCA) and gold holdings. FCA has declined $2.8 billion on-week to $468.87 billion. RBI's gold holdings had declined $1.5 billion to $37.45 billion in the same week. During the prior week ending Oct 7, India's forex reserves had gained some respite for the first time in 10 weeks, showing a gain of $204 million.  

Since the Russian invasion of Ukraine in February this year, the India's forex reserves have been on a sharp decline. Latest data from RBI show that the central bank has made a net sale of $4.2 billion in the forex market in August, following sales of $19 billion in July.  

In September, RBI governor Shaktikanta Das had told that India's forex reserves umbrella has remained strong despite the uncertainty in the global markets. Back then he had attributed the decline in reserves to valuation changes arising from an appreciating US dollar and higher US bond yields.

Deutsche Bank had earlier said that India's forex reserves will continue to fall because of India's increasing current account deficit and the steps taken by RBI to support the falling rupee.