India’s forex reserves climb nearly $1 billion to $672.5 billion

Mumbai, June 26 (IANS) India’s foreign exchange reserves rose by $963 million to $672, 587 billion in the week ended June 19, reversing the decline recorded in the previous week, according to data released by the Reserve Bank of India (RBI) on Friday.

The value of India’s gold reserves surged by $4.11 billion to $107.930 billion during the week.

However, the country’s holdings of Special Drawing Rights (SDRs) with the International Monetary Fund decreased by $52 million to $18.647 billion.

The country’s forex reserves had fallen in the preceding reporting week.

Despite the recent volatility, India’s reserves remain among the highest globally, although they are below the record high of $728.494 billion reached in the week ended February 27.

The reserve stockpile came under pressure in recent months following the outbreak of conflict in the Middle East, which prompted the RBI to intervene in the foreign exchange market through dollar sales to support the rupee.

Meanwhile, the RBI this week issued clarifications on the operational aspects of Foreign Currency Non-Resident Bank (FCNR-B) deposits, addressing queries raised by banks regarding the mobilisation of such deposits and related lending activities.

The RBI clarified that banks can also extend loans to FCNR-B account holders and are allowed to mark a lien on such deposits. The move provides greater operational flexibility to banks in raising foreign currency deposits from non-resident Indians.

The central bank further stated that banks will be eligible to undertake foreign exchange swaps with tenors of less than three years, provided they have mobilised fresh eligible FCNR-B deposits with a minimum original maturity of three years under the special scheme.

Under the arrangement, the RBI will offer a plain buy-sell foreign exchange swap facility to banks. The swap support will cover only the principal amount of the deposits and will not include the interest component.

Market participants believe that the higher deposit rates, coupled with the RBI’s swap support and operational clarifications, could encourage non-resident inflows in the coming weeks.

–IANS

na/vd