The Reserve Bank of India hogged the headlines for the third successive day on Friday with its weekly statistical supplement revealing that forex reserves hit an all-time high of $648.7 billion, up by $4.54 billion during the week to May 17.
The RBI surprised everyone including the government on Wednesday with an all-time high surplus transfer of Rs 2.1 trillion, for the fiscal year 2024, which was more than double what the government had budgeted for at Rs 1.02 trillion from all financial institutions.
This led to records in the markets on Thursday with the Sensex and Nifty scaling new peaks, pushing Dalal Street close to overtaking Hong Kong as the fourth largest market in terms of market cap with $5.05 trillion which is more than 142 percent of the GDP.
According to the RBI data, the forex reserves reached an all-time high of $648.7 billion as of May 17, with a weekly addition of $4.54 billion to the reserves. This follows a surge of $2.56 billion in the previous week. The previous record peak was $645.6 billion for the week to April 5.
Apart from offering macro stability and smooth payment settlements, the higher forex reserves also cements the country’s balance of payments position with higher and longer import cover, which at the current level should be around 13 months.
At $648.7 billion on a year to date basis, the kitty swelled by 496.47 billion, as this day last year the reserves stood at $552.23 billion which jumped to $648.70 billion as of last week.
The weekly increase was led by foreign currency assets which jumped by $3.361 billion to $569.01 billion, the central bank said. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
Gold reserves also increased by $1.24 billion to $57.19 billion, while SDRs rose by $113 million to $18.16 billion. But reserve position in the IMF declined by by $168 million to $4.32 billion.
Many analysts have said the record profit that the central bank booked this year was mainly driven by its huge dollar sales though the exact number is not available as the RBI annual report has not been made public yet. The more it intervenes in the forex market, the higher its turnover and thus trading income.
