India’s forex reserves nearing $700 billion

India's foreign exchange (forex) reserves surged $2.838 billion to reach a new high of $692.3 billion as of September 20, from $689.4 billion on September 13.

Reserve Bank of India's (RBI) data showed that the foreign currency asset, which is the major contributor to the forex reserves, increased from $2.057 billion to $605.686 billion.

The forex reserves are stated in the RBI report in the United States dollar; the foreign currency assets include the effect of appreciation or depreciation of non-US units like the pound, euro, and yen held in the foreign exchange reserves.

The RBI data also showed a $726 million increase in gold reserves to $63.613 billion in the latest filing, compared to $62.887 billion in the September 13 data. Gold is the second largest contributor to India's forex reserve.

Special Drawing Rights increase

Two other elements contribute to foreign exchange reserves: Special Drawing Rights (SDRs) and the Reserve position in the International Monetary Fund (IMF). According to the RBI data, the SDRs increased by $121 million to $18.540 billion as of September 20, compared to their previous level of $18.419 billion on September 13.

India's reserve position with the International Monetary Fund (IMF) fell $65 million to $4.458 billion from $4.523 billion in the previous week.

The Reserve Bank intervenes in the foreign exchange market to keep the volatility in the rupee in check. RBI's intervention causes a change in foreign currency assets, as well as the appreciation and depreciation of the foreign currencies held as reserves.

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