India’s foreign exchange reserves climbed sharply to $692.9 billion in the week ended July 31, reaching their highest level in nearly three months, according to data released by the Reserve Bank of India (RBI) on Wednesday. The increase marks the strongest weekly gain in the country’s reserves since the end of January, providing the central bank with a larger financial cushion amid global market uncertainties.
The reserve stockpile expanded by almost $10.5 billion from the previous week, reflecting robust foreign currency inflows and reinforcing India’s external financial position. A higher reserve base also enhances the RBI’s ability to manage volatility in the rupee, which has faced pressure from fluctuations in global crude oil prices triggered by the US-Israeli war with Iran.
Market participants attributed the sharp rise in reserves largely to the RBI’s Foreign Currency Non-Resident (FCNR) deposit mobilisation programme launched in June. The initiative was introduced to strengthen India’s balance of payments by encouraging banks to raise foreign currency deposits from non-resident Indians.
Banks raising these deposits are also allowed to swap the foreign currency with the RBI under a zero-cost hedging facility, which remains available until the end of September.
RBI Says Reserve Position Remains Comfortable
Speaking during the monetary policy announcement in Mumbai, RBI Governor Sanjay Malhotra highlighted that India’s reserve position continues to remain robust by global standards.
“India’s foreign exchange reserves continue to be adequate in terms of the standard metrics of reserve adequacy with import cover of over 10 months and external debt cover of 90.8 per cent,” RBI Governor Sanjay Malhotra said while delivering his monetary policy address in Mumbai.
The central bank, meanwhile, kept benchmark interest rates unchanged in its latest monetary policy review, in line with market expectations.
Rupee Posts Strongest Weekly Gain In Four Months
The period covered by the latest reserve data also saw a major recovery in the Indian currency. During the week ended July 31, the rupee appreciated 1.2 per cent, closing at 95.38 against the US dollar, its strongest weekly advance in four months.
Analysts believe that rising foreign exchange reserves, coupled with sustained foreign currency inflows, could further improve the RBI’s ability to stabilise the currency if external risks intensify. A stronger reserve position also boosts investor confidence by demonstrating India’s capacity to meet external payment obligations and absorb global financial shocks.
