India’s forex reserves likely crossed $600 billion this week: RBI

India’s foreign exchange reserves rose to a record $600 billion making the RBI’s intervention complex. But the governor clarified that the central bank does not plan to introduce new instruments to manage these inflows.

After a lull in April-May, the prospects for capital flows to India are improving again. ” As of last Friday, the country’s forex reserves touched $598.2 billion” RBI governor Shaktikanta Das said in his policy statement. ” We are in the striking distance of achieving $600 billion of reserves. Based on our current assessment, we feel that the reserves have already crossed $600 billion”.

Analysis of historical data indicates that the last $100 billion has taken exactly a year to plie-up and the fastest to accumulate in the central bank’s history.

But the rupee liquidity generated by accumulating dollars could impact domestic money market rates. But the central bank seems comfortable the way it is managing the flows. ” At the moment there is no necessity to deploy additional tools to sterilise the forex inflows” the governor said at the post policy media briefing. ” Any case at the end of the day, (through) our daily reverse repo window, the liquidity gets sterilised. It (need for new instruments) will depend on the situation evolves.

On the positive side such inflows help in easing external financing constraints, but could lead to financial market and asset price volatility. In the process there could be “undesirable and unintended fluctuations in liquidity that can vitiate the monetary policy stance” the governor said.

The Reserve Bank has been actively buying and selling dollars in various segments of the market. In FY’21, the central bank bought a net of $68 billion from the spot market alone. “The success of these efforts is reflected in the stability and orderliness in market conditions and in the exchange rate in spite of large global spillovers” the governor said.

Experts feel India’s forex reserve policy is assuming significance in conducting monetary policy. “As with our monetary policy framework, a considered debate around RBI’s exchange management objectives, tools, interlinkages, and outcomes can help instil all-round clarity, credibility and confidence, without compromising on RBI’s operational flexibility” said Professor Ananth Narayan, associate professor and head of research at SP Jain Institute of Management and Research.

Source link


England Bids to End 55 Years of Hurt as Johnson Gambles on Covid

Breadcrumb Trail Links PMN Business Author of the article: Bloomberg News Adam Blenford,...

China’s top diplomat heads to Russia as ties reach ‘best level in history’

China’s leading diplomat will travel to Russia on Monday for security talks, the latest sign of deepening ties between Beijing and Moscow amid...

Wine Rack Workers Set to Start Striking on June 7th; Pickets to be Set Up throughout the GTA

Wine Rack workers will begin striking on June 7th. Community members are being asked to support workers by making their wine purchases elsewhere...

How Indian agri exporters face some odd barriers

Jagdish Fofandi, a Gujarat-based seafood exporter, is in a quandary. Just ahead of the new fishing season, which begins next month, there’s been...

Future proof your career with ITIL 4 DITS Certification Why learn ITIL 4?

Why learn ITIL 4?ITIL 4 is an end-to-end operational model for developing, designing, and managing IT-enabled goods and services. The framework comprises real-world best...