India’s foreign exchange reserves increased by USD 9.112 billion to USD 615.971 billion in the week ending December 15, 2023. This increase is one of the highest for a week and marks a 20-month high, data released by the Reserve Bank of India on Friday showed.

India’s foreign exchange reserves include cash, bank deposits, bonds, and other financial assets denominated in currencies other than the Indian rupee. Notably, stronger foreign currency reserves allow developing market central banks to “buffer their currencies against sharp declines by supplying dollars to the market” at times of volatility.

India’s foreign currency assets (FCA), the biggest component of the forex reserves, rose USD 8.349 billion to USD 545.048 billion, the central bank’s weekly statistical data showed. FCA includes the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

Gold reserves during the week rose by USD 446 million to USD 47.577 billion.

Before December 15 week, India’s total foreign exchange reserves rose from USD 2.816 billion to USD 606.859 billion.

In October 2021, the country’s foreign exchange reserves touched an all-time high of about USD 645 billion. Much of the decline since then can be attributed to a rise in the cost of imported goods in 2022.

Also, the relative fall in forex reserves was largely because the RBI intervened in the market to defend the subsequent depreciation in the rupee against a surging US dollar.

Also, the relative fall in forex reserves was largely because the RBI intervened in the market to defend the subsequent depreciation in the rupee against a surging US dollar.

Forex reserves or foreign exchange reserves (FX reserves) are assets that are held by a nation’s central bank or monetary authority. It is generally held in reserve currencies usually the US Dollar and to a lesser degree the Euro, Japanese Yen, and Pound Sterling.

It is used to back its liabilities – like the native currency issued and also reserves deposited by financial institutions or the government with the central bank.