India's forex reserves rise to $623 billion, hit 22-month high

India's foreign exchange reserves ballooned by $2.759 billion to touch $623.20 billion for the week ending on December 29, revealed the latest data by the Reserve Bank of India (RBI) on Friday.

Earlier, there was a notable increase in forex reserves, rising by $4.47 billion to reach $620.44 billion for the week ending on December 22.

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As per the Weekly Statistical Supplement published by the RBI, foreign currency assets (FCAs) witnessed a rise of $1.87 billion, reaching a total of $551.62 billion. When denominated in dollars, the FCAs encompass the impact of the appreciation or depreciation of non-US currencies such as the euro, pound, and yen, which are part of the foreign exchange reserves.

Gold reserves increased by $853 million, reaching a total of $48.33 billion, while special drawing rights (SDRs) experienced a surge of $38 million, totalling $18.37 billion. The reserve position in the International Monetary Fund (IMF) saw a slight decrease, declining by $2 million to $4.89 billion.

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It is interesting to note that India's forex kitty had reached an all-time high of $645 billion in October 2021. However, the reserve has been declining since then as the central bank has been using it to defend the home currency due to global pressure.

From time to time, the RBI intervenes in the market via liquidity management, which includes the selling of dollars to avoid steep depreciation in the rupee. 

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The central bank also intervenes to maintain market conditions and curtail undue fluctuations in the exchange rate, without adhering to any predetermined target level or range.