India’s foreign-exchange reserves climbed to a record US$729.33 billion during the week ending August 21, supported by substantial capital inflows and foreign-currency deposits from non-resident Indians.Reserve Bank of India data showed a weekly increase of approximately US$12.4 billion. Foreign-currency assets accounted for most of that rise, while an increase in the assessed value of gold holdings also contributed.Since June, Indian banks have attracted approximately US$65 billion through NRI foreign-currency deposits under RBI-supported arrangements. The programme included favourable hedging facilities designed to encourage foreign-currency inflows and strengthen India’s external financial position.
Following the stronger-than-expected response, the RBI decided to end the special deposit-linked hedging facility earlier than originally planned. This decision applies to the incentive arrangement and does not close or restrict regular Foreign Currency Non-Resident, or FCNR, bank accounts.
The record reserve position gives the central bank a larger financial cushion to manage currency volatility, global market uncertainty and external payment pressures.
