India’s forex reserves hit record USD729bn

Business Recorder reported that India's foreign exchange reserves reached a new peak of USD729.33 billion in the week ending August 21, based on central bank figures published on Friday. The gain came from a steady stream of dollar inflows prompted by policy measures meant to improve the nation's balance of payments. Reserves have now risen for eight consecutive weeks, adding about USD63 billion and passing the previous high set in February.

The surge followed a package announced in June designed to attract more overseas currency. It included discounted hedging for foreign borrowing by government-owned companies and banks, along with a no-cost hedging option that lets banks take in foreign currency deposits abroad. Over the period from 5 June to 21 August, the Reserve Bank of India collected close to USD73 billion through these schemes, of which roughly USD65 billion came from non-resident Indian deposits. Because of the scale of inflows, the central bank decided to end its deposit hedging window a month early, at the end of August.

Gaura Sen Gupta, chief economist at IDFC First Bank, attributed the rise to two forces: dollar purchases by the RBI and a revaluation gain. She said the buying was mainly driven by the FCNR-B swap window, as banks encouraged depositors to commit funds before it shuts.