India's forex pile rises to six-month peak on sustained capital inflows

Business Recorder reported that India's foreign exchange reserves rose to $716.9 billion in the week to August 14, the highest level in roughly six months. The central bank's policy measures to strengthen the country's balance of payments drew inflows that lifted the total, according to the data released on Friday. The reserves gained nearly $10 billion over the week, a rise driven mainly by a $7.2 billion increase in foreign currency assets alongside a $2.7 billion gain in gold holdings.

Reserves have risen for seven straight weeks, adding about $50 billion over that stretch. The total now sits close to the record of $728.5 billion reached in February. Inflows followed June measures that included discounted hedging for state-run firms and banks borrowing overseas, plus a no-cost hedge for banks raising offshore FX deposits.

The central bank absorbs these inflows into its reserves through discounted FX swaps. Last week the RBI said it had received close to $57 billion in inflows under the measures up to August 13, mostly from more than $50 billion in FX deposits. Because of that scale, the central bank brought forward the end of its deposit hedging window, which will now close on August 31. Bankers said the central bank's frequent market interventions to protect the rupee have probably offset part of the dollar inflows from abroad.