India Climbs to 4th Spot As Forex Reserves Post Record Weekly Gain, Pg13

Key Highlights:

• India's foreign exchange reserves reached a new record of $785.71 billion on September 4.
• This surge propelled India to the 4th position globally in terms of forex reserves, surpassing Russia.
• The reserves recorded an unprecedented weekly gain of $44.9 billion in the week ending September 4.
• The significant increase was primarily driven by inflows from Foreign Currency Non-Resident (Bank) deposits under the Reserve Bank of India's (RBI) concessional swap scheme.
• The RBI closed the concessional swap scheme one month earlier than planned due to the rapid inflow of these deposits.

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Detailed Insights:

• The $44.9 billion weekly gain was more than two-and-a-half times higher than the previous record of $16.7 billion in August 2021.
• China and Japan currently hold the top two positions globally in foreign exchange reserves, followed by Switzerland.
• The RBI's special forex drive, initiated on June 5 and operational from June 8, attracted a total of $136.38 billion by August 31.
• This drive also included swap windows for Overseas Foreign Currency Borrowings (OFCBs) and External Commercial Borrowings (ECBs), which remain open until December 31.
• A higher level of forex reserves provides the RBI with enhanced capacity to intervene and stabilize the Indian Rupee when necessary.
• India's foreign exchange reserves have demonstrated a consistent upward trend, increasing for ten consecutive weeks.

Key Concepts Involved:

• Foreign Exchange Reserves (Forex Reserves): Assets held by a central bank in foreign currencies, used to back liabilities and influence monetary policy.
• Reserve Bank of India (RBI): India's central bank, responsible for monetary policy, currency issuance, and managing foreign exchange.
• Foreign Currency Non-Resident (Bank) deposits (FCNR(B) deposits): Term deposits held by Non-Resident Indians (NRIs) in foreign currency with Indian banks.
• Concessional swap scheme: A mechanism used by the RBI to encourage foreign currency inflows by offering favorable exchange rate terms.
• External Commercial Borrowings (ECBs): Loans raised by eligible resident entities from recognized non-resident entities.