India’s foreign exchange reserves witnessed a record weekly decline of $18.34 billion in the week ended September 25 to $747.56 billion, as the rupee came under intense pressure, forcing the Reserve Bank of India (RBI) to intervene aggressively to defend the currency and keep it above the 96-to-a-dollar level.
The steep decline in reserves came as the rupee remained under pressure amid higher crude oil prices and US Treasury yields, prompting the RBI to intervene in the foreign exchange market through both spot and forward transactions to contain excessive volatility.
In the previous reporting week ended September 18, the forex stockpile had declined by $15 billion to $765.9 billion, marking the sharpest weekly fall since November 15, 2024. The reserves had scaled a record high of $785.7 billion in the week ended September 5, rising by more than $44 billion, buoyed by $133 billion of inflows from non-resident Indians.
The latest decline was led by a steep $15.16 billion fall in foreign currency assets to $615.41 billion. FCAs are the largest component of the reserves and include assets denominated in currencies such as the euro, pound and yen.
The value of the RBI’s 810-tonne gold reserves also declined by $2.6 billion during the reporting week to $108.70 billion, according to the latest data released by the central bank on Friday.
The rupee has remained under strain despite the massive $143 billion-plus dollar inflows mobilised by the RBI through three concessional forex swap windows opened since June 8. Of the total, as much as $133 billion came through FCNR-B deposits by NRIs.
The rupee is facing pressure from multiple factors, including rising crude oil prices and elevated global bond yields. Crude averaged around $104 a barrel during the reporting week, while US Treasury yields rose above 5.25%, their highest level since 2004. Domestic bond yields have also climbed to a two-year high of around 7.20%.
The RBI’s active intervention in the forex market is also evident from the sharp rise in its net forward dollar liabilities, which ballooned to a record $200 billion in August. The increase came as the central bank absorbed a surge in one-off, policy-induced dollar inflows. Forward liabilities rose by $63 billion from the previous month in August, after hitting nearly $137 billion in July.
Under the dollar-swap arrangement, banks swapped dollars with the RBI, boosting the country’s foreign exchange reserves while creating a corresponding forward dollar liability for the central bank.
