Forex reserves surge by $58.38 bn in H1

The country's foreign exchange reserves surged by $58.38 billion in April-September 2021 to $635.36 billion, says an RBI report released on Wednesday.

The forex reserves were at $576.98 billion at end-March 2021.

The Reserve Bank of India (RBI) publishes half-yearly reports on management of foreign exchange reserves.

These reports are prepared half yearly with reference to the position as at end-March and end-September each year.

The report released on Wednesday is 37th in the series and is with reference to the foreign exchange reserve position as of end-September 2021.

"During the half-year period under review, reserves increased from $576.98 billion as at end-March 2021 to $635.36 billion as at end-September 2021,” the report said.

Although both US dollar and Euro are intervention currencies and the Foreign Currency Assets (FCA) are maintained in major currencies, the foreign exchange reserves are denominated and expressed in US dollar terms.

Movements in the FCA occur mainly on account of purchase and sale of foreign exchange by the RBI, income arising out of the deployment of the foreign exchange reserves, external aid receipts of the Central government and changes on account of revaluation of the assets, the report said.

As of end-September 2021, out of the total FCA of $573.60 billion, $383.74 billion was invested in securities, $147.86 billion was deposited with other central banks and the BIS and the balance $42.00 billion comprised deposits with commercial banks overseas, it said.

At the end of June 2021, the foreign exchange reserves cover of imports decreased to 15.8 months from 17.4 months at end-March 2021.

The ratio of short-term debt (original maturity) to reserves, which was 17.5 per cent at end-March 2021, declined to 16.8 per cent at end-June 2021.

The ratio of volatile capital flows (including cumulative foreign portfolio inflows and outstanding short-term debt) to reserves declined from 69 per cent at end-March 2021 to 65.5 per cent at end-June 2021, the report said.

As at end-September 2021, RBI held 743.84 metric tonnes of gold.

"While 451.54 metric tonnes of gold is held overseas in safe custody with the Bank of England and the Bank for International Settlements (BIS), 292.30 tonnes of gold is held domestically," the report said.

In value terms (USD), the share of gold in the total foreign exchange reserves increased marginally from about 5.87 per cent as at end-March 2021 to about 5.88 per cent as at end-September 2021, it said.

On a balance of payments basis (i.e., excluding valuation effects), foreign exchange reserves increased by $31.9 billion during April-June 2021 as compared with $19.8 billion during April-June 2020.

Foreign exchange reserves in nominal terms (including valuation effects) increased by $34.1 billion during April-June 2021 as compared with $27.9 billion in the corresponding period of 2020-21, it said.

The net forward asset (receivable) of RBI in the domestic foreign exchange market stood at $49.11 billion at the end of September 2021.

During the half-year under review, there were two Purchase transactions aggregating $191.29 million and one Repurchase transaction aggregating $46.68 million under the Financial Transaction Plan (FTP) of the IMF.

The IMF made an allocation of Special Drawing Rights (SDR) 12.57 billion (equivalent to around $17.86 billion at the latest exchange rate) to India on August 23, 2021, the report said.

Photograph: Gary Cameron/Reuters